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Borrowing funds is a necessary and vital part of managing a company. Start-up ventures apply for loans to help their company grow and obtain the equipment they need to produce their products.
Accumulating too much corporate debt, however, can cause your business to shut down. This happens when a business strategy doesn’t pan out or perform enough to settle what you owe.
If your business has fallen into a slump and is deep into debt, don’t fret. You can take measures to move your company’s balance sheet from red to black.
Here are a few suggestions to help you turn things around for your business:
Cut Down Overhead Expenses
The overheads of your company are what’s costing you money each day. You can bump up your profit margin when you focus on decreasing this area of your business.
When business owners hear the word “overhead,” the first few ideas that pop into their minds are office rental payments, utility costs and staffing. Many, however, overlook other factors, such as office supply costs, equipment expenses and employee bonuses.
Look at areas where you could reduce costs easily. One thing you could do is to get in touch with material suppliers or vendors and utility companies and negotiate ways to cut down your expenses. If you’ve been working with them for quite a while now, consider haggling or asking for discounts.
Come up with an Effective Debt Payment System
Debt can undermine the profitability of your company. If your business is drowning in debt, you need a sound plan to eradicate it effectively. Keep these debt relief tips in mind:
- List down all your debts. Include business loans, debts owed to vendors and business credit cards. Then, organise each item by interest rate.
- Zero in and pay off high-interest debts first. As much as possible, pay these debts within a year of starting them. If possible, reach out to your lender and see if you could reduce the interest rate on these debts.
- Prioritise paying off outstanding liabilities that could undermine business relationships and reputation.
- Apply for a debt consolidation loan if you’re juggling several high-interest loans. This will help you pay less on interest charges. Just make sure that you’re approaching a creditor that’s reliable and trustworthy.
- Use a debt payoff calculator to determine how much interest you’ll pay and how long you’ll have to make payments.
Rework Your Budget
Errors in your budget could cause your business to rack up more debt or spend more than what’s necessary. This often happens when the company sticks to a budgeting plan that’s no longer appropriate for their current financial situation.
Check your budget to determine where exactly your funds are going. Make sure that your monthly profits outweigh your fixed costs. Also, see to it that you have enough funds left over to pay off variable and unforeseen expenses.
Assess Your Business Management
If something’s wrong in your company, you need to look at how people are managing the business. Many don’t view themselves as the source or root cause of the problem, but this is necessary if you want to save your business from possible bankruptcy.
Find out how you and your people are managing day-to-day work. Then, check for problems affecting employee performance and company profitability. Once you’ve identified the issues, come up with solutions and strategies to improve your existing processes.
Grow Your Customer Base
By beefing up your customer base (especially loyal customers), you increase your revenue and help you pay off debt and expenses more easily. Check out these tried-and-true suggestions for attracting more customers to your business establishment:
- Do Networking – Raise the brand awareness of your small business by attending meet-up events and joining your trade association.
- Create a New Website (or Update Your Existing One) – Consumers usually do an online search to look up local businesses in their area. This means that you need to have a website, so that these consumers can find you. Implement search engine optimisation and marketing tactics that will improve your online visibility. You could hire an SEO and web design expert for further assistance.
- Team up with Complementary Businesses – Partner with companies with a similar customer base (but aren’t your direct competition), and then come up with strategies to market each other’s business. If your business sells office furniture, for instance, work with a company that offers computers and laptops.
When your business is struggling, don’t lose hope quickly. The right strategy and mindset can help your company recover during times of difficulty or uncertainty.