Small Business REHAB – “Survival Mode”

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Action plan Typically, people think of drug addicts or serious injuries when they hear rehab. We all know rehab is short for rehabilitation and with the current business market businesses need some serious rehabilitation! Days of letting things slide and splurging on meaningless expenses are long gone. A discussion I am having with business owners’ way too often is – “My business is in trouble! What do I do?” So what should a business owner do? Go into survival mode and rehabilitate!

When should you a business owner go into “survival mode”? For most it is obvious – they can’t collect and pay mounting bills. But, for many it sneaks up on them. Here are the common signs that your business is in trouble:

· When more cash is going out than what is coming in.

· When your bank account balances fall below their normal for two straight months.

· When future sales outlooks are dim.

· When your 941 payroll tax deposits cannot be paid on time.



So what do you do once you realize your business is in survival mode?


First, the business owner must “adjust their attitude”.


The business owner’s ability to adapt to their current situation is the number one predictor of whether the company will survive or not. A business owner must:

· Stop panicking, take a deep breath and take a proactive stance.  Start thinking and planning.

· The business owner must understand that this recession is real and that business failure will severely affect their family, employees and creditors.

· Accept the responsibility! Everything good or bad that happens is a result of decisions YOU have made and will make.

· Forget the past. Fixating on your mistakes will just enable you. (I am often guilty of this one. Thank God my wife is around to knock me out of it!)

· Go back to your roots. Understand that this will be hard and will take extra time and energy while the business is in “Survival Mode”.

· Go into business overdrive. When you are at your business:

o    Don’t answer non-business email.

o   Don’t waste time on social networks (Facebook, MySpace, Twitter, etc) unless of course it is business related.

o   Don’t surf the web.

o   Don’t make personal calls.

· Stay positive! Visualize success constantly.

· Eliminate the blame game. Remember it’s always your fault – So just fix it!

· Set goals in writing. Better yet, write a business plan. Get your goals down and keep them where you can see them to serve as a reminder.


6ce45759814b66be The Second thing a business owner must do is create a detailed cash budget.

You must know that you will need $10,000 for Friday’s payroll at least a week ahead of time not when you are writing the paychecks! A cash budget gives you the early warning signal you need to react.




The third thing a business owner must do is cut costs.


· Carefully review every cost. Eliminate or reduce those that don’t have an effect on your customers’ experience or help you provide a better product. Be honest and brutal. It’s sink or swim time don’t think of it as being cheap, think of it as being prudent.

· Review labor costs. Employees are often the largest cost under the owner’s control. Cut non-essential employees, cut hours, hire temps as needed, initiate temporary unpaid furloughs. Yes, this is tough for everyone. But, if you don’t survive everyone loses. You can always rehire and increase hours once you are back on your feet.

· Use the barter system. Cash is the life blood of your business so guard it closely.

· Negotiate for price reductions at the time of purchase. Simply ask, “Is this the best price you can give me?” It is survival time you sometimes have to put your pride aside and do what is in your best interest.

· Delay purchasing equipment and supplies as long as possible.

· Don’t carry excess inventory. Have a sale to reduce inventory and increase cash

· Renegotiate credit terms with your vendors. Ask for price cuts, extended payment terms and long-term funding. Even then, pay them a couple of days late.

· Pay invoices with a credit card and then pay the credit card in full before the due date. Can often buy an extra thirty days at no cost to you.

· Negotiate a reduction in what you owe with your vendors. If you have the cash, agree to pay 60%-80% now in exchange for a write-off. Caution, don’t do this with essential vendors.



78655800_19673cdc06 Fourth on our list is increasing customer cash collections.

Failure to collect receivables on a timely basis is the number one reason behind cash flow problems. It must be one of the business owner’s main priorities. So,


· Call, call and call again! In tough times your customers are paying the bills they have to in order to stay open, and then they are paying the squeaky wheel. Don’t be proud – Squeak loudly!

· Get deposits on orders or services at the time of the order. This one step is often all that you might need in order to eliminate a cash problem.

· Request payment as soon as the job is completed or the product is delivered.

· Mail or email the invoice ASAP. Don’t wait until the end of the month.

· Research and resolve any client questions or complaints. The number one reason an invoice isn’t paid is because the customer had a complaint or doesn’t understand the bill. If you don’t take care of their concern they will not pay!



Fifth – Commit time & energy to your sales and marketing program.


Sales are what drive any business. So, why not try to give them a boost. Once you have cut costs and increased customer cash collections the road out of “survival mode” is to increase your revenue. The business owner must educate themselves on marketing and make a firm commitment to their sales & marketing program. This means you must:

· Educate yourself. Buy and read Guerrilla Marketing by Jay Conrad Levinson. We will be more than happy to help set up a marketing and advertising plan just give us a call. Pay attention to future blogs for marketing tips.

· Write-up a marketing and sales plan.

· Commit at least one hour a day on sales to current customer. These are the easiest people to sell to! They already know you, trust you and by their past purchases have shown that they need your product or service.


· Commit at least one hour a day to marketing to new customers. Create a plan designed to get prospects to contact you. Then you must work on a plan to get these prospects through the three steps to final sales. Before someone buys from you they must:

1.    Know about you and your products or services.

2.    They must be convinced that your product or service will solve their needs or wants.

3.    They must trust that you and your company, can deliver what you have promised.

· Research new products or services that you can sell to your current customer base.


BusinessLoans_pix Finally, look for a source of outside funds to buy time until your marketing and sales efforts pay off.

The following list should help you find the funds needed:


· Get cash advances from any open line of credits or credit cards.

· Apply for new loans. This assumes that your financials are still strong and that you caught the problem early. The time to get a line of credit is before you need it.

· Factor your receivables. This is costly. But, it can quickly get you the cash you need to survive or to fund a marketing and advertising campaign.

· Ask your customers for prepayments. If you have re-occurring sales ask for prepayments by giving them a discount.

· Borrow from you or your spouse’s 401K. When you pay it back the interest is being paid to your retirement account.

·  Get a second loan on your home.

· Sell off excess personal and business property and equipment. Sell the vacation home. Sell the extra car, boat, RV or motor bike you haven’t used in months.

· Get loans from friends and family.


I know all these suggestions sound extreme but you have a responsibility to everyone who relies on your business to do everything possible to make it succeed. You can’t rehabilitate anything that no longer exists.



One final thought – The items discussed above would work well with any business. The best thing is to never get into “survival mode!” I know that is easier said than done. Applying the above now will lead to a highly successful business that you can enjoy and be proud of.