Are you operating your business in loss? Oh, that is quite a task, and if you don’t find an immediate remedy, massive destruction may happen. But you know what, always struggle before surrender.
Profit and loss are part of the life of every business person. The smart thing is to stay equipped with some ideas that can pull your business out if it is running in loss. Here are some tips for that –
Cut working capital costs up to 30%
Yes, ‘drastically’ is the word that you need to keep in approach while dealing with the day-to-day expenses. It certainly is a BIG challenge, but to make the failing business survive and live again, some sudden changes are required.
- A clear difference between priority and non-priority expenses can make a lot of difference. Make a list of all the costs and right away deduct the insignificant ones.
- Set a tight monthly budget and try to manage in the 70% budget. It is imperative to learn money management when the business is in considerable loss.
Reduce the inventory cycles
A business in loss needs to take significant actions and divert its immediate attention to the inventory part. It is about working on the annual production of the products you make. During the difficult time, it becomes vital to reduce the number of inventory cycles to keep the expenses in control.
Yes, this can affect your market size for some time, but already your business has a degraded capacity to produce due to massive loss.
How to reduce the inventory cycle?
- Decrease the quantity of stock, it helps bring down the electricity and other costs
- Fix a delivery time to avoid producing extra stock to avoid scarcity of supply issue
- Remove the obsolete inventory that contains the products no more in demand
Keep only the skilled staff
In place of a big bunch of people who work day and night for you, keep the staff who is value for money. The employees with smart working skills and better speed can give a lot more to the company than a crowd of incompetent people.
- Give importance to multi-tasking employees.
- Keep the employees who can stay for long in the company.
- Find the employee with the skill of master in one and jack of all trades.
Settle the old debts as much as possible
Debt management becomes a big challenge for a business during difficult times. The accumulation of debts and obligation cause missed and delayed payments and cause a drop in credit score. You need to work on it soon; otherwise, new chaos of pending obligations can quickly take a monstrous size.
- Sell some old assets that are not in use and pay off some of the debts ultimately.
- Talk to the finance companies to redesign the deal at a lower rate of interest.
- Use the money saved from cost-cutting to make part payments of debts.
Encash goodwill through an increase in price
Yes, the simplest way to tackle the mess of money chaos is, increase the price of your product or service. If you are an established brand and have earned the precious asset of goodwill, it is the time to use it.
Increase the prices of your product/service. However, it should not be a considerable increase but a practical one that can be justified in your advertisements.
Tips for applying when you increase the price in the market –
- Increase price but give justification. Relate it with quality and describe a new change in the product; it can easily justify the increase in the hike.
- Reduce the size or quantity of the product. You can make more packs in the same raw material quantity and can get more in the same number of units.
- Bundle the services or products. It does not let the consumer realize much the change of price increase. The reason for the hike is easy to explain when you sell a bunch of things.
Downsize advertisement and promotion costs
Why do you need to invest so much in the promotion if you are a renowned name? From financial services to beauty products, if the market is familiar with your name, minimize the marketing cost.
Here are two examples –
- If you are a finance company with a good number of applicants for quick loans in Ireland every year, it means you are famous. Then why to spend on the regular advertisement, give a break, and promote on selective platforms.
- If you sell luxury handbags and people love your products, they can remember you without much effort and expenses in the advertisement.
There can be many other ways besides these generic points to tackle the financial chaos in your business. But the above ones apply to all types of businesses and companies. Spend wisely, generate new earning opportunities, and you can save your business at least from complete destruction.