Page 30 - How To Avoid Going Bust In Business

Look carefully at each customer and decide if their business is worth the trouble. If
you have overly delinquent payers put them on cash-only.

Take a hard look at your stock and equipment. Cash up slow moving stock by
dumping it at discount prices. Just get the money out of it.

That can apply even to large, expensive items.

I once had a builder come to me with a major problem. He had six finished
apartments that were eating their heads off in interest payments on development
loans. My advice was slash the prices, get your capital out – what’s left of it – and
get into another project that will show a profit. Even take the loss and with luck you’ll
be back in the black before your banker even notices.

Have a look at things like your car. Do you really need a late model Merc? Sell it.
Get a smaller cheaper car. Don’t let your ego rule common sense.

The same with any capital equipment. If it’s not paying its way, sell it. You may be
better off hiring machinery as required or contracting some work out and using the
cash from the sale to shore up the operation in other areas. Remember, this is about
survival so it may not be the ideal structure.

I used to enjoy playing chess in my younger days. A local café owner was also a
keen chess player, and a very good one. I would sit in a quiet corner of the
restaurant poring over the board. He would swan by in between cooking and serving
customers and make his next move.

I usually lost.

One of the lessons he taught me - and it is equally true for business – was when in
trouble, simplify. Reduce the game to its essentials. Eliminate the distractions.

Look at every aspect of the business. Treat every part of it like a farmer treats a
chicken. When they stop laying eggs they get the big chop. It’s sometimes referred
to as “getting back to your knitting”, or “focussing on your core business”.

Especially, look at projects that are draining resources. Take off the rose tinted
glasses. Ask yourself will this dog ever hunt? If the time for it to reach positive cash
flow and to profit is excessive, cut it loose. Right now you can’t afford passengers.

13: Take a long hard look at the business

Stand-by – reality check incoming.

Is the business viable in the longer term?

Again, an outside perspective is valuable here. Your accountant, bank manager,
mentor or anyone with business experience who can be roped in can be most helpful
in giving you plain-spoken advice.