Instability in the economy is always going to make things difficult for business owners. It can impact levels of demand and this in turn will affect individual profitability. As such, it will be interesting to see how businesses cope in 2017. After all, it does look as though we are heading into a period of economic turmoil. Whether or not countries will regain their footing after Brexit, the presidential election and Cuba remains to be seen. For now, though, let’s think more short term. Let’s imagine what would happen if this months you found your business was in the red. Essentially, costs of running your company had risen past levels of profit.
This isn’t as rare as most business owners think. For industries like manufacturing and farming, it’s a common occurrence that needs to be dealt with at least once annually. But how do they do this? The answer to that question might become crucial next year.
Borrow, borrow, borrow
There are two reasons why you might want to borrow for your business. First, if costs outweigh profits, you might need to. Particularly when expensive processes make up the daily workings of your business. This is the case in manufacturing, and therefore manufacturers have no choice but to look into business loans.
There is another reason though. By going into the red, you could ultimately damage your credit rating. This is going to weaken the value of your business and make it less attractive to investors. As such, borrowing might be the best solution. By borrowing you can protect your credit rating and thus, the future value of your business.
Buy now, pay later
Another option would be to continue to purchase and fund your company as normal, even though you don’t have the value. To do this, you just need to find a company that is willing to provide a product with a late invoice part of the transaction. Again, in many industries this is seen as a common practice particularly when times are tight. Although it can leave the other company out of pocket and this can create more problems. Buying on credit should always be a last resort for a business owner. Don’t forget that if your business is to succeed, you will need the support of other companies. You won’t have this if your decisions leave them upstream without a paddle.
The final option you should consider is cutting back completely. By doing this, you will change and adapt your business model to ensure that it is ready for future financial challenges. One of the most popular ways to do this right now is to convert to an online model of business. By doing this you can avoid a lot of expensive costs such as a business office. Instead, your company can be run from home and you can outsource a wide variety of different processes. This may seem like an extreme measure. But it is something you will always have to consider. Particularly if there is evidence that your current model of business simply is not working.