Emergency preparedness is quite essential to deal with uncertain economic situations. It is the reason why individuals ensure enough food and savings to be self-reliant during times of crisis. The same thing is applicable for large and small scale businesses too. Cash reserves and proper financial planning can help firms survive during tough times like the current COVID pandemic. We will discuss more on this in the next section.
Business tips for beginners
When firms realise that they are not prepared for an emergency, it is essential to start planning the following steps. For small businesses, tips and advice to ensure financial readiness for any emergency are explained below:
1. Access the baseline expenses
Small firms need to consider the fixed and miscellaneous expenses necessary for maintaining the business every month. Prepare a monthly or quarterly budget keeping your long-term and short-term goals in mind. In this, you also have to set aside some portion of the fund for emergency purposes. Based on the budget plan, set the revenue targets.
2. Analyse your client base
Check if you have predictable client work, which can help you easily become a full-time business owner. It includes clients who are eagerly looking forward to your work, and hence you don't have to make strategies for aggressive marketing. But if your business needs serious marketing efforts, analyse the success rates based on your past efforts. This will help you know the time needed for scaling up the business to full capacity based on the current client load. These parameters help you make important financial decisions based on the available time.
3. Using automated systems to help in managing the finances
Managing the financial situation of businesses is somewhat complex. It involves tracking expenses, invoicing, making payments, keeping a record of the late payments, tax payments, etc. All these become pretty overwhelming if done manually. You can prevent this by using the right systems to ease the whole process, save time and make the process error-free. Some of such systems include invoicing software, financial management, and project management solutions. You can begin with the basic packages of these solutions and then take the premium once the business scales up.
The automated systems cut the cost of employing personnel for managing the business finances. For example, with OKCredit, small-scale businesses can use this app for financial management to get a good return on investment. It not only saves time through automation but makes the process more efficient.
4. Seek the advice of a financial expert
It is recommended for businesses to discuss the financial situation with a financial expert. It includes analysing the short-term and long-term business goals and making changes in the strategies to ensure better efficiency. You may need some investment, but it will be worth it as businesses can identify the gaps and blinds spots in the plans and thus results in a greater probability of succeeding in their efforts to attain the goals.
5. Comprehend the current tax situation
Small businesses should understand the tax obligations, check the cash flow, and ensure they are paid on time. It will help in avoiding coming under the income tax radar and paying the penalties. So you can invest time and effort in better revenue generation.
6. Business Insurance
Insurance helps keep peace of mind as you will have support if an unforeseen circumstance damages your business. You can choose it based on your business location and industry. Some policies even protect the customers injured on-site besides recovering the damage to inventory and property. An insurance premium will be an additional expense, but this investment is worth nothing compared to destroying all your efforts. Firms can even discuss with experts to learn about the insurances that can save them in uncertain times.
7. Look for financial assistance at the right place
Businesses should know about the local and central government programs meant for offering immediate help during uncertain times. Availing Small business grants or a low-interest loan is one such assistance to rebuild a damaged business. This can help in getting new equipment, machinery, or other assets.
Crowdfunding is another popular way of getting financial assistance. It involves asking for small-scale donations for people on different websites such as GoFundMe, Kickstarter, Indiegogo, etc. To attract better funds, companies can offer perks like exclusive membership or future merchandise from the firm.
Similarly, businesses with high growth potential can seek venture capital. In this, professional investors in the market invest a significant amount in the companies in return for decision-making powers.
8. Avoiding unexpected cash flows
New businesses need to keep this in mind to save money for emergencies. You need to be resourceful and creative because sometimes soft cutting helps in efficiently financing the business. You can do this in the following ways:
- Delay in buying items that are not mandatory at the moment.
- Opt for a location that matches the budget.
- Limit the products and services offered during the initial stage. It can be enhanced later when the business is scaled up.
9. Diversification and a backup plan
A backup plan is a good idea for businesses to keep alternative sources of income ready. This will be helpful in emergencies and keep you mentally strong as the business won't crumble completely. Besides this, servicing various clients in diverse industries is a good way of protecting against economic crises. If you have just one client, losing it will hit your business hard compared to losing a few clients among many clients. This needs careful market study to look out for clients whose requirements can be efficiently met by your business. Diversification will require more investment, but this will prevent the company from completely collapsing in the worst-case scenarios.
10. Revenue enhancement through better marketing strategies to save for emergencies
Businesses need to formulate better, efficient marketing strategies to earn more revenue. The first thing you need to do is learn about the competitors. Check out what kind of USPs are they offering to the customers. And decide on your product and services’ USPs. If needed, businesses should partner with the right companies involved in complementary businesses to enhance their customer base. You can also offer Loyalty programs to convince customers to spend more on the company's products and services.
A business has to adapt to the ongoing situations to keep going. It is easy to dive through during good times, but during times of uncertainty like the COVID-19 pandemic, it becomes challenging to survive without enough financial support. Similarly, there can be natural calamities or tough market competition, making it quite difficult for a business to sustain itself. So it is essential to be well prepared for every circumstance. Following the business tips listed above can be very useful in overcoming challenging situations and recovering back to normal.
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3) Tips for Businesses to Overcome the Covid Blues - Revival Tips for Businesses
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Q. What is the best way of preparing an efficient business budget to be emergency-ready?
Ans. The management of a company prepares a realistic budget. To ensure better sustainability during an emergency, they need to take inputs from all levels of people in the firm so that enough data will back the budget.
Q. How important is the conversion rate for a business to survive in the market during challenging times?
Ans. Businesses must have a reasonable conversion rate today to keep going even in challenging situations. This needs formulating better strategies that can generate leads. Businesses need to understand the customer requirements to be able to attract the right leads.
Q. How can technology be used by small businesses to perform better even during times of financial crisis?
Ans. Incorporating technological advancements in business helps ease the process by reducing the need for human intervention for paperwork. For example, small businesses can use the solutions such as OKCredit for maintaining paper account books. It also provides on-demand clarity on the records that are presented to the shoppers by the merchants.