Surviving a financial crisis can be a daunting task, especially for small businesses. As fellow entrepreneurs, we understand the challenges that come with unexpected financial hurdles.
1. Assessing Your Current Financial Situation
To overcome financial hardship, it is crucial to take charge of your business’s budgeting and financial planning. While this may not be your area of expertise, it is essential for you to be directly involved in creating and controlling your budget. Collaborate with your financial team, if you have one, to gain a comprehensive understanding of your current financial standing.
2. Establishing a Budget Period and Planning Cycle
Given the rapidly changing and unpredictable economic landscape, it is advisable to adopt a one-month budget plan during these times. However, regular revisions and updates should be made on a weekly basis to align your plans and forecasts with the evolving circumstances.
3. Building Your Operating Budget
Budgeting involves making predictions, which can be challenging even during normal times. When facing a crisis, your primary goal should be to sustain your business, even if it means breaking even for a short period. To determine your break-even point, closely examine your company’s current financial status. Analyze your average monthly revenue and operating costs to ensure that your revenue covers your expenses.
If you are unsure of your break-even number, consult your bookkeeper or accountant for assistance. Once you have this information, you can realistically project your operating expenses for the next month, providing a starting point for your adjusted revenue goal.
4. Modifying Your Budget for Adjusted Revenue Goals
To create an accurate revenue prediction for the month, compare it to the revenue goal you have set to cover your operating expenses. For example, if you have already experienced a 25% loss in revenue over the past two weeks, plan for that loss to continue for the next month. Adjust your revenue projection accordingly, considering any financial aid such as lines of credit, loans, or grants that you may receive.
5. Implementing Cost-Cutting Measures, If Needed
If there is still a gap between your projected revenue and the expenses you need to cover, consider implementing cost-cutting measures. However, it is important to be strategic in your approach. Consider collecting outstanding payments owed to your business and identify areas where costs can be reduced without compromising your ability to ramp up production when the market rebounds. Prioritize retaining your workforce whenever possible, as they are vital to your business’s long-term success.
6. The Iterative Nature of Budgeting
In recent years, it has become evident that frequent updates to your budget plan may be necessary, and this trend may persist. Embrace the idea of adapting to changing circumstances and stay proactive in managing your company’s finances. By staying informed and taking control, you position your business to emerge from the financial crisis stronger than ever.
At times of crisis, it is crucial for businesses to gain control over their finances. We remain committed to assisting businesses during such challenging periods. If you are seeking further guidance on financial management and taking control of your business’s financial situation, our team is here to support you. Together, we can navigate these uncertain times and ensure a brighter future for your business.