Do not doom your business to bankruptcy
Development and positive dynamics are good, aren’t they? Mostly, yes. But for business too dynamic development can be fatal. In this article we will tell you how to avoid such a danger.
For a start, let’s figure out what is the basis for business development. First of all, it is, of course, the establishment of a base of major consumers and an understanding of their needs and desires, the ability to enter into lucrative deals and make competent investments. But on the other hand, no matter how paradoxical it may sound, business development can be synonymous with the ability to slow down and reduce growth and production rates in time.
To protect the business from bankruptcy, it is necessary to restrain its development. Otherwise, you may encounter a problem that will be expressed in the fact that the growth rate of your company will outpace its financial capabilities, including for acquiring the necessary assets, paying bills for the goods sent and attracting a client.
For example, the founders of the company for the production of ice cream Phin & Phebes Jess Eddy and Krista Freeman see the problem in the ability to balance the situation, in particular, evenly distribute finance for the release of the product itself, taking into account the increase in demand and the necessary equipment and delivery of this product to the consumer. They also emphasize that the company as a whole should not grow faster than its bank account.
So, in order to control the pace of business development, you should first take the following steps:
1. Control the movement of financial cash.
You should always try to consider how the dynamics of the development of your business and the increased demand for the product or service you create will affect your company’s cash requirements. After all, it is not enough to simply create a product, you still need to deliver it to the consumer and incur associated costs. And given that the specifics of many businesses are such that cash outflows are far ahead of their receipts, there is a risk of being left without cash, which is a direct way to bankruptcy.
2. Adequately assess the cost of attracting new customers.
Many companies to attract consumers resort to systems of discounts. But this strategy works and turns out to be profitable, only in case of making repeated purchases by the client. Otherwise, your business will have to incur losses.
3. Think over the distribution of finance in advance.
Make sure that the lines of credit and equity match the development plan. Also do not forget that the mobilization of capital will take some time if you suddenly need cash.
Development is a definite plus, but only if it is developed in the right direction. Therefore, make every effort to foresee all the special risks that are associated with the formation of your and your business and try to suppress them. This is the only way to ensure sustainable growth for your business.