Running a business is hard. You have to balance workloads with staffing. You have to find ways to bring in new customers while previous customers may not return. And, most importantly, you have to run in the black instead of the red.
As a lot of businesses are learning during the Coronavirus pandemic, they’re not in a good position financially. They’re struggling to keep the doors open. Some businesses are even closing their doors (Logan’s Restaurant did just that).
This creates a major issue. Not only will the economy lose the money coming in from the businesses that close, but their team members are also left struggling to figure out what to do.
Could you imagine going into work, learning you have been laid off until the current crisis was resolved, and then find out you no longer have a job to go back to? Many people are facing this reality.
Because too many businesses are running on slim margins. They are draining every last bit of money out of the organization. There’s nothing left at the end of the day after paying their team members, vendors, and themselves.
When a crisis hits, these businesses are in trouble. They either have to go to the bank and hope the bank will lend them money or they have to shutter their doors. Neither option is great. Both options could sink the organization.
Why Business Leaders Need To Have Their Organizations Be Financially Independent During Crises Like The Coronavirus Pandemic
The above is the reason why business leaders need to make sure the organizations they’re leading are financially Independent, especially when crises like the Coronavirus strike. It’s a disaster if you’re running on little to no margins. Your business could be closed quicker than the snap of Thanos’ fingers.
Running a business that is financially Independent is difficult. There are so many expenses that a business must have to run.
But… what if your business was financially independent?
Is this even a possibility? In a world where you’re told to take out another loan to pay for your next big adventure, the next company acquisition, or your used car, too many people see financial independence as a pipe-dream.
I’m here to tell you running a financially independent organization is possible. It will take hard work. It may even make you cry. But when you have a financially independent business, your life will never be the same.
When you begin to run a business that is financially independent, you have a lot less to worry about. You won’t have to constantly wonder if there is money in the bank account to pay your vendors. You’ll have already paid them on-time or ahead of time. You won’t have to worry about making payroll. The money is there.
A financially independent business helps the leaders sleep easy at night.
How To Become A Financially Independent Business
I’m not going to lie. Becoming a financially independent business isn’t a task for the faint of heart. It’s the task of brave leaders. Leaders who value their team members and their organization.
There will be sacrifices from you, the other leaders, and possibly your team members. In the end, it is worth it.
Take a temporary pay cut:
The leaders of an organization typically have more margin than their team members who are being paid minimum wage or just above. The ones who can really absorb the blow of a financial cut can be the leaders of the organizations.
To get into a good financial position where you can jumpstart the pathway to becoming a financially independent business, the leaders may want to look at their compensation.
Can the leaders take a 3% cut in their paychecks? Could the leaders forgo a paycheck or two in exchange for shares of the business?
There are many ways leaders can take a temporary pay cut to jumpstart the process of becoming financially independent.
Pay off business credit cards at the end of every month:
Yes, you can do this! You can pay off the credit cards your business carries every month. It’s not the first step but it is a step in the process.
By paying off the balance of your business credit cards, you will have less margin but you will not be paying the extra interest rates the credit card companies charge. Interest rates range between 9-22% APR. That’s a lot of interest you’re paying throughout the year.
Begin to work at paying off the business credit cards. Freeing up the extra you’re paying in interest can allow you to invest this amount in other business ventures.
Look for high-margin products:
What does your business do? Are the margins slim? Could there be a way to increase the margins while keeping your customers happy with a quality product?
There are many high-margin products that businesses miss because they believe their customers need the most expensive products available. There may be products that are just as good, cost less, but still provide high-margins.
Look to offer some of these products to your customers. Through this, you do have to make sure the products are high-quality.
Bargin with your vendors:
Your vendors’ prices are not set in stone. You may be able to go to your vendors and ask for a discount on the products you’re purchasing.
Each discount you receive is extra money in your pocket. This is money you can use to make more money or to help build cash reserves for your business.
Build cash reserves:
Each of the above steps will help with this final step. To become financially independent in your business, you will have to create and build cash reserves.
Building cash reserves is like everything else you do in business. It’s one small step after another.
You can build cash reserves by socking away .5% or 1% or more of the cash your business takes in. Make sure this is untouchable money until you really need it.
The more you set aside, the faster your business can move from a bank-dependent business to a financially independent business.
When you begin to take the steps to build cash reserves, the better off your business will be in times of crisis. You won’t freak out if another pandemic like the Coronavirus strikes. Your business will be in a position where it, and you, can weather the uncertain times.
Making sure your business is financially independent makes sense.