Business is not for the timid, but for the brave and resourceful. Courage is necessary because it’s difficult for you to anticipate all possible contingencies. It’s almost impossible to prepare ahead of time on what you need to know to make the best decisions when a peril or opportunity opens up. Similarly, resourcefulness is necessary to make ends meet when you are starting a business. It isn’t uncommon for entrepreneurs to go without a paycheck for a length of time while the business gets off the ground and to have to work side jobs to keep the business afloat.
Here are two ways of coping with a financial crisis early in your business: one, for working with a problem with a recognizable cause; the other, for working on a problem whose cause eludes you:
How to Deal with a Known Cause
If you know the cause of the problem because it’s obvious, you need to evaluate the scope of the financial problem so that you can arrive at the best solution.
The financial constraints you’re facing may not be as bad as you imagine. An unexpected spike in your overhead might be compensated for by an increase in sales revenue. Perhaps, too, it’s a minor issue that can be resolved by using a payday loan alternative to get your business back on track. For instance, you might feel inclined to panic if your single business vehicle, a delivery van, has broken down — but with a few hundred dollars worth of repairs, you’ll be back to serving your customers.
Conversely, the problem may appear minor, tempting you to ignore it, but it will get worse if you do nothing about it. For instance, it’s easy to overlook a slump in sales volume for a particular quarter, but this might be the symptoms of a deeper malaise, a shift in the market or a problem with the way your sales team is closing sales.
Either way, whether it looks bad but can be easily remedied or it looks mild but can get worse, assessing the scope of the problem will give you a realistic picture so that you can then find the best solution.
How to Deal with an Unknown Cause
Financial problems are not random events, but symptoms of an underlying cause, a business process that is malfunctioning. If the reason for the problem is obvious, you can move toward a solution, but if you don’t know the actual reason why your business is losing money, then you obviously can’t even begin to think about possible solutions.
Naturally, if you know the cause of the problem, you can work towards a solution. If the salaries you’re offering candidates are below market value, then you can raise them. If there are certain company policies that people consider unfair, you can revise them. However, what do you do if you don’t know the cause? In cases when you don’t know why a problem exists, it’s necessary to resort to applying some problem-solving methodologies or hiring outside experts to help you with the detective work necessary for identifying the unknown cause.
As an example, let’s suppose your HR department has begun to notice that your business has a high staff turnover. Since you spend so much money training new staff, watching them quit soon after working for your company is a cause for financial concern.
Here are 4 steps you can take:
- First, define the problem, getting clear on why a certain situation is problematic.
- Second, get some metrics on what has happened and forecast what will happen if the problem continues.
- Third, research all possible causes until you find the root cause that is responsible for the diverse problems your business is experiencing. A single issue may be manifesting in different ways.
- Fourth, implement a solution and be sure to test it for awhile to see if it works well enough to put the problem behind you.
Problems and Processes
What known and unknown business problems have in common is that they both cause financial distress because they arise from a broken business process. Through patient inquiry and methodically trying out the best solutions that occur to you, they can be resolved. If it’s a discrepancy in cash flow, you can raise the money to resume business operations, or if it’s a problem within the company, then you can use problem-solving methods to identify the hidden cause and set things right again.
