Even the most astute business owner may face financial difficulties. A financial setback can arise from the loss of a key client, or your top sales person suddenly quitting, a new competitor who undercuts your prices, or maybe a natural disaster that wipes out your manufacturing plant.

Recovering from a financial setback can be difficult, but it can be done. Here are some tips to start rebuilding a business after financial disaster strikes.

Maintain perspective. Don’t panic – it may not be the catastrophe it appears to be. Maintain perspective and recognize that financial setbacks are usually temporary.  If you’ve planned for the long term, you should have built up an emergency fund and established a disaster recovery plan.  If you haven’t, make plans now to set up both of these financial “life preservers” so you’ll be prepared for next time.

Evaluate the nature and scope of the problem. Understand what you’re dealing with before you develop a solution that may or may not fit the real problem.  It may be a single problem with a single solution, or a series of problems that requires a more detailed strategy.

Rather than initiating a knee-jerk response, contact a trusted third party like your CPA or your banker, explain the situation and ask for advice before proceeding.

Don’t focus on the past. Perhaps mistakes were made. Projections were off by a lot. A new competitor moved in down the street. Don’t dwell on the past. Deal with today’s financial facts today.

If you’re frozen on yesterday’s financials, you may be freezing out a better future that focuses on fixing the fiasco.

Keep moving forward. A major financial setback can knock even a stable business for a loop. The business becomes stalled. Staff morale is low. Innovation is nonexistent.

Keep your business moving forward after a financial setback. New initiatives, new clients and customers, an increase in the marketing budget. Don’t let a single financial flop cause your business to fail. You’ve worked too hard to give up.

Fix the mistake. Once you’ve identified the source of the financial nosedive, fix it so it doesn’t happen again. For example, your business was running cash short and couldn’t handle a big order. A business credit line would solve the problem the next time it comes up. Examine your business model, service delivery, key personnel, opportunities to expand – you may have to change a few things to fix the problem.

The important thing is that you fix it, and FAST!

Remain flexible. You may have to set new priorities after a financial disaster. You may have to put off hiring new staff or adding a satellite office.

As a responsible business owner, chances are you have a long-term plan. Don’t hold on to it in the face of a financial disaster. Set new objectives that fit current circumstances. Prioritize business activity based on today’s reality, not last year’s best-case scenario.

As business finances change, so does the way you do business and plan for business growth. Stay nimble. Have several contingency plans “just in case.”

Cut expenses. A financial calamity often requires a new budget to address a cash shortfall, or some bad publicity or negative product reviews.

Look for ways to shrink costs to keep cash flowing.  You may have to lay off staff, cut benefits, move to a smaller office. There are a lot of ways to cut expenses.  Not all of them are pretty, but if the alternative is closing your doors, it may be time to bite the bullet and do what’s needed.

Sit down with your accountant and your banker to find ways to cut operational expenses and expand those all-important business margins.

Skip the excuses. Clients and customers want fixes, NOT excuses. You can’t “explain away” a financial fiasco, but you can own up to the problem and develop solutions to fix it. Don’t stonewall clients, the press, or important contacts.  Admit what happened and let them know your plans for recovery.

Businesses sometimes face financial problems that may seem insurmountable – and sadly, sometimes they are.  However, with careful evaluation, expert advice, and a pro-active approach to solving a financial problem facing your company, you may be able to weather the storm, learn from your experience, and emerge stronger and more successful than ever before.

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.