How Can One Handle a Big Loss in a Business?

The Covid-19 pandemic affected businesses of all scales equally. With a crash in the economy and unexpected changes in the social setting of the world, several companies went out of business while others suffered huge losses. For beginners and small business owners, this is a particularly daunting situation, considering all the possible overheads and liabilities associated with their business. Of course, there is some emotional investment in a business that makes it even harder to manage these losses.

Here are some useful tips on how to handle loss in business and move onto the next best opportunity to help you find success.

1. Make Sure You Are Not Impulsive

It is very easy to get impulsive when you are managing huge financial losses. This leads to rash decisions like burning through all your savings or mortgaging the assets that you have remaining to make up for these losses or to build capital for your business. Business owners also feel the need to withdraw any investments that they have made because of the fear of losing more money.

One of the most important business tips is to think of the long-term effect of any decision that you might take and never act in the heat of the moment. If needed, make a note of all your liabilities and also list the pros and cons of any financial decision that you take. Since you have already lost a lot of money, it is not advisable to run through any more funds that you have to keep you going with your expenses and overheads.

2. Assess Your Losses Carefully

Most often, the situation is not as bad as it looks at first glance. Therefore, it is highly recommended that you assess the losses incurred. If needed, seek assistance from a senior or an expert to give you a third-party view of your situation.

This allows you to take stock of your losses in the most rational manner possible. Of all the business tips and tricks provided by experts, the most prominent one is expecting losses and figuring out a practical strategy to overcome them. You may have to rebuild your business from scratch. That is perfectly normal when you are figuring out how to handle loss in business.

One effective way of doing this is to do thorough market research in the current situation and understand the pain points of businesses similar to yours. You may even find case studies of organisations that have successfully coped with financial stress. Once you have these important facts in place, you can try to incorporate them into your own strategy to rebuild your business. You may get ideas to diversify the services and products that you offer to address the problems faced by your customers as well.

With this, you get a simple, yet fruitful solution to mitigate losses in the future and manage the ones you have already incurred.

3. Relook at your current expenses

Often the possible solutions to any complex problems are much simpler than you would imagine. One common business advice provided by experts is to revisit your expenses and cut back on them until you have recovered your losses.

For instance, most companies chose to downsize and let go of their brick-and-mortar office spaces during the pandemic. While this seems like a difficult choice to make, it might be the need of the hour for your brand. If you are a sole business owner, your personal expenses can also impact your business. Simple things like cutting down on eating out or other unwanted expenses can help you increase your cash flow significantly.

If cutting down on your expenses does not seem like the right choice, there are other business tips and tricks that you can try out. For instance, increasing your income from other resources is a great starting point.

4. Increase your Income From Various Sources

This is one of the most important business tips for beginners. When you start a business, you are likely to focus on a specific skill that you have to offer. While this may have been advantageous in the past, in a situation like the pandemic, it may not be enough to help you sustain your business.

This is when you should try and tap into your other skills to increase the revenue for your business or to make up for the losses that you incurred. First, create a strategy to rebuild your existing business. Then, look at building additional income sources to make up for the financial gaps that you currently have in your business.

Today, with the help of the internet, you can look for new connections to help expand your business. You can even find new opportunities to make some extra income. The term side hustle has become more popular in the current scenario where business owners have been forced to increase income streams. For instance, if you are a skilled editor or writer, you have endless freelance opportunities that can help you make a good amount of money to sustain your expenses.

The advantage of building a side hustle is that it also has the potential of becoming a main income source in the future. You may also develop an interest in a new field of work that is more profitable than the one that you are currently invested in.

5. Seek Assistance to Cope Emotionally

As mentioned above, many business owners do not understand how to handle loss in business because they are unable to think of it rationally. No doubt, you are passionate about your business and have invested not only time but also a good amount of money in it.

However, one of the most important business tips for beginners is to be able to switch into a practical mode when a business model is failing. This requires some emotional support. You can seek the assistance of your current team, friends, or family members to deal with the emotional stress that you are currently undergoing. If that does not help, you can even consult a professional counsellor or life coach who can help you think with more clarity.

Also read:

1) Business Success Tips Every Business Owner Should Know
2) Top 10 Businessmen in the Industry & What You Can Learn From Them
3) Tips for Work-Life Balance for the Modern Businessperson
4) How to get your business listed on the Stock Exchange?

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FAQs

Q. Is it a good idea to take a personal loan?

Ans. In a state of financial stress, adding to the liability is never advised. However, if you are certain that a specific loan amount can help with your rebuilding strategy and also fulfil the eligibility criteria for the same, you may approach your bank for a personal loan. However, remember that it is an added liability.

Q. How can I get investment into my business?

Ans. Usually, investors may not show interest in a business that is clearly showing huge losses. If you need to raise capital for your business, there are some options. If you have a loan currently that is regular and standard, ask your bank for a top-up. Alternatively, you may approach friends and family to help you raise funds for your business.

Q. Is it advisable to add a partner onboard?

Ans. If you have a partner who can bring invaluable skills along with some investment in the business, you can bring them on board to help deal with losses.

Q. When do you know that it is time to close a business?

Ans. Although this is one of the hardest decisions, it is one of the best business tips and tricks that is used by successful entrepreneurs as well. When you do not see the scope of an industry increasing in the near future or find that you need a lot of investment to rebuild a business, it is an indication that you should probably close the business and step in a new direction altogether.

Q. What kind of expert should I approach to help me rebuild my business?

Ans. You can approach a business analyst or a financial advisor as to the first step to understanding what changes you need to make with your business. You can even talk to your mentors or seniors who have experience in an industry similar to yours.