SolveYourProblem
Article Series:
Start
A Home Business
Managing
Business Risk: The Disaster Plan
by Jeff Cohen
An extremely important factor in any business
is how you can manage risk – yet it is a factor that is most
often ignored by home business owners.
You have to realize that any time you start a business, you
are taking the risk that the business might fail. What experienced
people do is shield themselves from risk at every available
opportunity, to make sure that they can keep a business going
for months on the brink of disaster, and wind it down gracefully
if it really has to go under.
You need to have a plan for what you’re going to do if your
business looks like its going bankrupt. Are you going to borrow
more money, if you can? Sell your car? Raise prices? Get rid
of staff? Done right, you should have a good package of ‘rescue
measures’ that really do have a chance of rescuing your business.
Borrowing Money
If you need to borrow more to keep your business afloat, take
great pains to avoid looking desperate. Act like your business
is moderately successful but needs more investment, and you’re
far more likely to succeed in getting more funding.
Reduce Staff
This is a bad idea, but not always a terrible one. In a home
business, you presumably only take on staff because you have
enough business to cover it, don’t you? So it makes perfect
sense to get rid of the staff when things start to go wrong
and go back to doing it all yourself.
A Price Hike
When your business is in trouble, there are few things guaranteed
to destroy it faster than a price increase. Just don’t do it,
however tempting it might be – cut costs instead. If you absolutely
must raise prices, do it by scaling back what you get for your
money in each of your price ranges, without actually raising
the prices.
I know of a struggling bus company that kept its fares the
same for years but gradually started to run fewer buses and
send them all over town, making journeys take longer. People
reacted a little badly to the longer journeys, but it was nowhere
near the scandal that there would have been if prices had risen.
Keep Staff Pay Aside
Whatever you do, make sure to keep staff pay separate from
the other business finances, and pay it out immediately if
the business looks to be heading for trouble with its creditors.
It is far better to be paying your staff on the last day than
to be giving all that money to the creditors. Leaving staff
unpaid will destroy your reputation, not to mention hurting
a lot of innocent people.
The ‘Closing Down’ Sale
If you plan it well, your last day in business might not be
so bad. Just make sure everyone knows that you’re closing down
for real, but still price everything ever-so-slightly above
cost. In this way, you can avoid the drastic loss-making ‘Everything
Must Go!’ mentality, and come out of your business the same
way as you would if you’d decided to shut it down that day
for some other reason.
Selling Your Business On
If you’re shrewd about it, you might be able to keep your
business going long enough to sell it to someone who could
turn it around. There’s nothing dishonest about this route
– it’s the one most big companies take if things start to go
wrong. You might even find that one of your competitors is
willing to buy, even if only for your established customer
base.
It’s Up to You
Disaster plans are very personal, and they depend a lot on
how much risk you’re willing to put on yourself. If you do
things the sensible way, then you’ll go as far as you can to
avoid selling or borrowing against any of your own assets just
to keep a business afloat. On the other hand, if you’re really
determined and a bit of a risk-taker, putting some things of
your own at stake might buy you enough time to recover from
whatever hit your business.
It’s a little like playing poker: are you going to be the
guy who walks away and leaves his money on the table, or are
you going to throw your car or house keys onto the table and
raise the stakes? That’s risk management for you.
# # # # # SolveYourProblem.com : 2007
> Home > Start
a Home Business Articles:
Main Page
|
