Starting a business is a big achievement. Staying in business is a bigger one. If only it were as simple as having a great product or service that your customers love. At some point, every entrepreneur faces financial challenges that pose hard questions and difficult choices.
Are these among your concerns?
Debt recovery: It’s time for your customer to pay for your goods or services. In an ideal world, everyone pays you on time and in full, but as you know, the world isn’t always ideal. We all encounter clients that don’t pay on time, refuse to pay, or can’t afford to pay the full amount. So what comes next?
You need to have a plan. You’ll want to approach each situation on a case-by-case basis. It’s important to respond in an appropriate manner. By “appropriate” I don’t just mean “businesslike” in your choice of words (although that’s called for). Yes, you have rights, but also there is a fine (and legal) line between checking in and harassing.
Undercutting: Undercutting is also known as predatory pricing. A company sets a product or service at a very low price to gain new customers and drive current and future competitors out of the market. What if a rival effectively undercuts you on price? Should you lower your prices in response? If so, by how much? And if not, then what?
Lack of expansion: You have customers. They buy the same thing from you, spending the same amount every time. Is there something wrong with that? Actually, yes. Every company needs to consider the churn rate—knowing that a certain number of regular customers will leave due to dissatisfaction, better offers or other factors. If you aren’t looking for cross-selling and up-selling opportunities—i.e. other reasons for your customers to stay—your churn rate may be unsustainable. The key is increasing the value of your relationship with your customers without making them feel like they are constantly being “sold to.”
Lack of funding: Also known as a lack of working capital. To build up your working capital, your current assets must be greater than your current liabilities. Most business owners know how much money is needed to keep day-to-day operations running. But when you are out of sync with how much revenue is generated by sales, you end up with funding shortfalls. You want to avoid having inadequate access to working capital and other financing options. One strategy is to research and secure financing options before the funding becomes necessary.
If your business is facing these challenges, our team offers solutions that work. Let us know if we can help you clear these hurdles and stay in business, as it’s exactly what our business is all about!