You may be in Mail Order, Direct Mail, or you may be a local
merchant with 150 employees; whichever, however or
whatever - - - you ' ve got to know how to keep your business alive
during economic recessions. Anytime the cash flow in a business,
large or small, starts to tighten up, the money management of
that business has to be run as a " tight ship. "
Some of the things you can and should do include protecting
yourself from expenditures made on impetuous impulse. We ' ve all
bought merchandise or services we really didn ' t need simply
because we were in the tenor, or conceivably in response to the
flamboyancy of the advertising or the persuasiveness of the
salesperson. Then we sort of " wake up " a couple of days following and
find that we ' ve committed hundreds of dollars of business funds
for an item or service that ' s not essential to the success of our
own business, when really pressing items had been waiting for
those dollars.
If you are incorporated, you can eliminate these " impulse
purchases " by including in your by - laws a clause that states:
" All purchasing decisions over ( a certain amount ) are contingent
upon crack by the board of directors. " This will stimulus you to
see about any " impulse purchases " of considerable cost, and may
even be a monthly in the case of smaller purchases.
If your business is a cooperation, you can state, when faced with
a buying adjudication, that all purchases are contingent upon the
confirmation of a interrogatory party. In reality, the questioning party can be
your partner, one of your department cats, or even one of your
suppliers.
If your business is a sole proprietorship, you don ' t have much to
worry about really, because as an individual you have three days
to think about your purchase, and then to nuke that purchase
if you think you don ' t really need it or can ' t feed it.
While you may think you cannot look after it, be sure that you don ' t
" short - change " yourself on professional services. This would
advance especially during a time of affair. Anytime you commit
yourself and move ahead without completely investigating all the
angles, and preparing yourself for all the contingencies that may
arise, you ' re skating on thin ice. Regardless of the costs
involved, it always pays off in the long run to go into out the
advice of experienced professionals before embarking on a plan
that could ruin you.
As an example, an experienced business consultant can fill you in
on the 1244 stock advantages. Getting eligibility for the 1244
stock society is a very simple the book, but one with tremendous
benefits to your business.
The 1244 stock encourages investors to put reparation capital into
your business because in the matter of a loss, amounts up to the
entire aggregate of the investment can be written off in the current
year. Without the " 1244 " grouping, any losses would have to
be spread over several years, and this, of course, would superlatively
lessen the allure of your company ' s stock. Any business
hotelier who has not filed the 1244 charge has in reaction cut
himself off from 90 percent of his prospective investors.
Particularly when sales are down, you must be " hard - nosed " with
people trying to sell you luxuries for your business. When
business is booming, you just so will allow sales people to
show you new models of equipment or a new line of supplies; but
when your business is down, skip the entertaining frills and
get together on the basics. Great care must be taken however, to
maintain courtesy and allow these sellers to study you a
kissing cousin and call back at another time.
Your company ' s books should reflect your way of thinking, and
whoever maintains them should generate information according to
your policies. Consequently, you should hire an outside accountant or
accounting firm to figure your return on your investment, as well
as the turnover on your accounts receivable and inventory. Such
an check-up or survey should polestar in depth on any or every item
within the financial statement that merits significant attention. in
this way, you ' ll probably recognize any likely financial
problems before they become readily apparent, and certainly
before they could get out of hand.
Many small companies set up advisory boards of outside
professional people. These are sometimes proclaimed as power Circles,
and once in place, the business always benefits, especially in
times of short operating capital. Such an advisory board or power
circle should include an attorney, a certified public accountant,
civic club leaders, owners or managers of businesses similar to
yours, and retired executives. Setting up such an advisory board
of directors is really quite easy, because most people you ask
will be honored to serve.
Once your board is set up, you should meet once a month and
present material for review. Each meeting should be a discussion
of your business problems and an input from your advisors
relative to possible solutions. These members of your board od
advisors should offer you advice as well as alternatives, and
provide you with objectivity. No formal decisions need to be made
either at your board meeting, or as a result of them, but you
should be able to gain a great deal from the suggestions you
hear.
You will find that most of your customers have the money to pay
at least some of what they owe you immediately. To keep them
current, and the number of accounts receivable in your files to a
minimum, you should call them on the phone and ask for some kind
of explanation why they ' re falling behind. if you develop such a
habit as part of your operating procedure, you ' ll find your
invoices will magically be drawn to the front of their piles of
bills to pay. While maintaining a courteous attitude, don ' t
hesitant, or too much of a " nice guy " when it comes to collecting
money.
Something else that ' s a very good business practice, but which
few business owners do is to methodically build a credit rating
with their local banks. Particularly when you have a good cash
flow, you should borrow $100 to $1, 000 from your banks every 90
days or so. Simply borrow the money, and place it in an interest
bearing account, and then pay it all back at least a month or so
before it ' s due. By doing this, you will increase the borrowing
power of your signature, and strengthen your ability to obtain
needed financing on short notice. This is a kind of business
leverage that will be of great value to you if or whenever your
cash position becomes less favorable.
By all means, join your industry ' s local and national trade
associations. Most of these organizations have a wealth of
information available on everything from details on your
competitors to average industry sales figures, new products,
services, and trends.
If you are given a membership certificate or wall plaque, you
should display these conspicuously on your office wall. Customers
like to see such " seals of approval " and feel additional
confidence in your business when they see them.
Still another thing often overlooked: If at all possible, you
should have your spouse work in the business with you for at
least three or four weeks per year. The important thing is that
if for any reason you are not available to run the business, your
spouse will be familiar with certain people and situations about
your business. These people should include your attorney,
accountant, any consultants or advisors, creditors and your major
suppliers. The long - term advantages of having your spouse work
four weeks per year in your business with you will greatly
outweigh the short - term inconvenience. Many couples share
responsibility and time entirely, which is in most cases even
more desirable.
Whenever you can, and as often as you need it, take advantage of
whatever free business counseling is available. The Small
Business Administration published many excellent booklets,
checklist and brochures on quite a large variety of businesses.
these publications are available through the U. S. Government
printing office. Most local universities, and many private
organizations hold seminars at minimal cost, and often without
charge. You should also take advantage of the services offered by
your bank and local library.
The important thing about running a small business is to know the
direction in which you ' re heading; to know on a day - to - day basis
your progress in that very direction; to be aware of what your
competitors are doing and to practice good money management at
all times. All this will prepare you to recognize potential
problems before they arise.
In order to survive with a small business, regardless of the
economic climate, it is essential to surround yourself with smart
people, and practice sound business management at all times.
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