Getting Out of a Financial Crisis in Your Business

First off, this sucks. I know how much it sucks because I've been in this position and it was RUBBISH. Sh** happens to everyone, and often it’s not even within our control. And even if said sh** happened because we messed up somewhere, that’s OK!

We’re all human, we all make mistakes. We live, and we learn.


“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money…”

Step 1: Self-compassion

The first, and arguably most important, step is self-compassion. You are NOT a failure or bad business owner—sometimes life is just like this, and by reading this blog you are already looking directly at the problem. That's a brave and powerful step, and one which should be celebrated!

You are also not alone—I've been here, I've had other clients come to me in this place, and the rate of small business closures means we are never alone if we find ourselves in trouble. Approximately 20% of small businesses fail in their first year, and 50% fail in the first 5 years [reference]. Cashflow is a significant reason for a large proportion of those closures.

Now, your next steps will depend on your exact circumstances—your business may come back stronger after a reshake, but you are the most important thing and you need looking after while you address your money worries. Find low-cost ways to walk, talk, and move to keep you connected with friends and physically active. You are worth caring for, and no money crisis is more important than your health and wellbeing.


Step 2: Looking directly at the numbers.

It’s hard, but knowing lets you problem solve, plan, or even just be prepared for the “your payment didn’t go through” emails. Personally, I used the money management app YNAB while struggling. 

Even though it’s paid, it helped me understand EXACTLY where my money needed to go. If you don't want to pay for the software, YNAB: The Book is another option. Getting the book and following the four rules helped me climb out of a sticky spot, and helped me assess exactly where and how big my shortfalls were.

I know this can sting, but knowing gives us targets and information to allow our next steps...

Step 3: Professional advice

Do this as early as possible! Getting relevant financial, debt, housing, legal, and bankruptcy advice from registered professionals can clear the fog by a considerable amount and help with setting up a battle plan. I'm not any of these finance professionals, but let me tell you that knowing your numbers will let you have a more productive conversation with a relevant professional. 

Just make sure you fully understand the consequences of any decisions you make, and KEEP BEING KIND TO YOURSELF. These professionals have their jobs because this is a human problem, not a you specific problem!

Step 4: Reduce your costs

Maybe you’ve done this already, but if you haven't, reducing what comes out of your account will help ensure cash stays with you for as long as possible (if you read YNAB, this is one of the rules: 'Age Your Money'). 

Other ways you could cut some corners are:

  1. Downsizing your team (Keep your eyes peeled for my upcoming blog post about this topic)

  2. Tech subscriptions

  3. Data storage

  4. Memberships

  5. Facilities

  6. ‘Nice to have’s


Step 5: Best revenue stream

It’s time to put all your bets on your winning horse. Focus on developing the thing that’s brought you the most money up to now. This is a ‘raft to a drowning person’ situation, so not a time for perfection!

Be light, be quick, be responsive. Reach out to past clients, send out offers to existing clients; most of your effort should go into promoting this one thing in order to kickstart fast growth.

Set a target for reaching out to prospects and track your progress daily—in light of a hard slog, we need regular way markers!

“…Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.”

Bonus Tip: Know Your Limits

Make sure you set boundaries around when you need to get a job or roll up the business. This is a HARD decision to make, but when you are fighting an unwinnable fight deciding to let go and start over is liberating and relieving in equal measure. Sure, your ego might be bruised (mine certainly was), but you will leave in one piece and live to try again another way. Trust your gut if you're not sure.

After the financial crisis, even when your cash flow is better, you’ll have a recovery period. This is normal and OK—and it still kinda sucks. 

This actually took me by surprise when I was still replacing old worn-out everything after a spell of replacing absolutely nothing. You're not imagining it, it's real and it's OK. Your debts aren't just in your bank accounts, they are in your worn through jeans and old, glitchy laptop. Keep being kind to yourself as you recover, be thrifty where you can (Thrift Plus is a favourite of mine), and recognise this as part of the recovery.

Know it will be OK, and that you have survived the worst!

Try and start to build savings cushions every step of the way; in your business account, in the money you set aside for taxes, in your savings account, and in your checking account. Every little bit counts, so don’t feel pressure to set aside any kind of big some. If one quid is all you have spare, then put aside that one quid. Even just a quid a day will eventually become 100.

It’s also very important to recognise you might need some extra support or emotional processing to recover from this experience. Chronic financial stress is not only exhausting, but can leave us with business trauma that shows up at inconvenient times later. If you want to talk, then you can reach me here.

You may have a new take on money after this experience, which I will allow Terry Pratchett to finish summarising for you as a parting thought.

You got this, and I'm here if you need support!

 

“...But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”

― Terry Pratchett, Men at Arms: The Play


And if you’d like to read more, here are some books that cover thinking errors in interesting ways:

Why You Skipped Your Workout
The Little CBT Workbook
Why Has Nobody Told Me This Before)

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Why Extra Steps Might Be Just What You Need