What to Do When You Can't Raise Money
Mastering the art of Frugality
Despite your best efforts, sometimes you simply won't be able to meet your capital fundraising goals. Does that mean you should just throw in the towel and give up? No way! Although it's not the ideal situation, your business can get by when times are tough. Here's how:
Cut the fluff
The first and most obvious thing to do when you are experiencing financial difficulty is to cut the fluff out of your business, i.e. anything that isn't absolutely necessary to keep the business afloat. Sit down with your key staff members and put everything on the table. You'll be amazed how much you can save.
Work out of your home
Many small businesses begin in garages, basements and spare bedrooms. When cash is tight, working out of your home may be just the ticket to help your business get on its feet. You'll have to use your best judgment to determine whether or not it's possible for your business to operate in a home environment, even for a short period of time. Home offices are just not practical for some kinds of businesses, e.g. retail establishments.
Sell and take orders
Sales are the driving force behind the growth of small businesses. If sales slump, then growth becomes prohibitive. Conversely, if sales are booming, then the business is growing and generating additional capital.
If your business is going through a capital shortfall, make sales a top priority. Devote as much time as possible to developing new sales leads and cultivating relationships with clients. If you can, take orders and advance deposits for products in order to stimulate cash flow.
Re-evaluate your goals
Sometimes business owners create problems for themselves by setting unrealistic goals for their businesses. When they attempt to meet those goals, they overreach and place an undue financial burden on the business. If your business is going through a financially difficult period, consider whether the business has been constrained by unrealistic goals or whether there are other factors at work.
Take a financial inventory
Likewise, financial hardship can be caused by a misapplication of financial resources. For example, if your business is repaying a loan for long-term capital with a short-term financing mechanism, don't be surprised if your cash flow is suffering. Sit down with a qualified financial advisor to make sure your financial resources are working with you and not against you.
Explore opportunities for bartering and collaboration
Be assured that you are not the only small business owner in your area who is experiencing financial hardship. There are others — some within your industry and some in other industries altogether — who are encountering the same struggles and challenges.
What would happen if you got together with other struggling business owners and agreed to exchange services so that all of your businesses can succeed? In some cases, your conversations may even result in collective agreements with vendors or collaborative marketing strategies. The sky's the limit!