When you are a small business owner and personally responsible for your own livelihood, having a financial setback is a very common concern. It only takes a few things to happen at the same time and your financial situation can get thrown completely off track. Imagine that you launch an extensive marketing campaign just as you lose your biggest client. This kind of combination can happen to anyone at any time, and cause an instant financial setback.
The good news is that you can salvage what you have left and return your small business to where it was before (or perhaps an even better place), but only if you act fast. Here are some tips to try if you are facing a financial setback.
Take an Honest Look at the Situation
Before you do anything else, remind yourself that the financial setback is not necessarily a catastrophe that you won't be able to recover from. In fact, a financial setback is usually just a temporary slowdown. It's a change to the routines you have in place, albeit a change that probably isn't welcome, but a change that you can work to accommodate.
Once you've given yourself a chance to regroup, it's time to analyze the situation and try to figure out what went wrong. Look at the situation objectively so you can identify what happened and determine the best way to move forward.
Activate Your Contingency Plan
If you already have a contingency plan mapped out, now is the time to put it into action. If you don't, you'll need to create a Plan B - fast.
The immediate goal of your alternate plan is to figure out a way to fill the gap in lost income. This may seem impossible. After all, if there were an easy solution, your setback would be non-existent. But you do have options; you just need to think a little creatively to uncover them. Perhaps temporarily cutting back on your marketing campaign, selling new products or services to existing clients, or cutting expenses will help you fill the financial void.
The measures you take now do not have to last forever, so think in terms of a temporary fix.
Reevaluate Your Financial Priorities
As you work on figuring out what you can do to adjust your finances to accommodate the deficit, you may need to do some hard analysis into your business financial data. One part of this process is to look at your expenditures to see where your money is going. Based on what’s going out, you can identify the must-haves, the nice-to-haves and the do-withouts in order to see where cuts can be made.
Start by making a list of your current expenses and categorize each into one of the three groups. Anything that falls under do-withouts should be cut immediately. Anything on the must-haves list should stick around. The nice-to-have list can be a little trickier. Cut what makes sense to cut based on the situation and keep the rest of the list in reserve as potential cutbacks for later on, if you need to reduce your expenses even more.
Be Proactive and Flexible
Throughout this recovery process, you may be forced to take measures you would not have chosen in a normal situation. And the end result may not be the solution you envisioned. But sometimes, the only option is to set new goals, commit to doing whatever it takes to achieve then, and to remind yourself to go with the flow when the path curves out of view.
Not only will fast action help you to fix the situation and get past it quickly, but flexibility can make your business stronger and more resilient in the end.
Keep in mind that when you get past this -- and you will -- you will have a pretty powerful learning experience behind you. And, if all goes well, your lessons learned will help you prevent future financial setbacks.