Turn a business setback into opportunity
There's no denying that the pandemic was devastating for many small businesses. But many business owners were able to pivot and thrive despite the adverse conditions.
Fast thinking and luck certainly played a role for some but planning ahead is also important. These six steps could get your business into a position where it can turn the next potential setback into an opportunity.
1. Create a business emergency fund.
Many people are familiar with emergency funds as part of managing their personal finances. It's money that you set aside to cover three to six months' worth of living expenses during an emergency.
The same concept can be applied to your business's finances.
You may have a long list of potential business investments and setting money aside might not seem like the most efficient way to use your capital. However, being able to tap into these funds can make all the difference if and when trouble arises.
2. Establish and build your business credit.
Small business owners may overlook the potential to establish and build their business's credit, which is completely separate from their personal credit.
Building your business's credit could help you qualify for better rates and terms on loans and lines of credit. Additionally, it could lead to lower business insurance premiums, easier access to leases, and longer terms from suppliers and vendors.
The process can be a little tricky, but the SBA’s guide to building credit can help you get started.
Learning the differences between personal and business credit scores is also helpful. For example, you may need to make payments early to get the highest score with the Dun and Bradstreet Paydex business credit score. Consumer credit scores only consider whether you paid on time or late.
3. Ask for terms accounts from your suppliers.
A buffer between when you order inventory or supplies and have to pay your invoices can be important for creating a financially resilient business. And that's exactly what a terms account offers.
For instance, with a net-30 terms account, you have 30 days between receiving an invoice and the payment's due date. The timing can vary, with short net-10 or -15 terms, or all the way up to net-60 or net-90.
Once you have established a history of paying your bills on time, be proactive about asking for a terms account. Having a good business credit score may also help, particularly if you're working with large vendors.
4. Open a business line of credit.
A business line of credit gives you the option—but not the obligation—to borrow money. It could be a good idea to apply at a time when your business is in good standing and will likely qualify. Each bank will have its own application process, but you can be prepared by organizing your accounts and financial statements.
Once you're approved, you can then tap the line of credit to take out a “draw" (i.e., loan) and use the funds to help smooth a cash crunch. Or, it could be a fund that you can draw from to invest in a great opportunity when one comes along.
5. Focus on customer satisfaction.
Customer satisfaction as a measurement of how well a product or service meets up to—or surpasses—the customer’s expectations. Why improve customer satisfaction? It’s less expensive to keep existing customers than to find new ones. The U.S. Small Business Administration reports that 68% of customers leave because they’re upset with the treatment they've received.
Prioritizing customer satisfaction and service helps you attract and retain loyal customers and can have a big impact on your bottom line. Consider a customer survey to ensure you’re meeting their needs and what else could you provide that would make their experience even better.
6. Create a buzz around your small business.
Today, there are many ways to reach out to current and potential customers that are relatively inexpensive. Make sure your business has both a website and social media presence. By attracting followers on platforms like Facebook or Instagram, you can get your business noticed. If your business is local, make connections with the area media to help promote your unique story or special event.
The key is creating buzz around your business by telling people what makes it unique. Maybe you don’t charge for delivery. Or offer discounts on special days of the week. Or have items or services that other businesses don’t offer. Customers who feel special will often go out of their way to put your business on their radar.
Be ready to pivot when needed
Getting your business into a position where it's capable of responding to a setback is important. But you could still miss opportunities if you're not prepared to lead the way. In addition to working on your business's finances and reputation, consider finding a mentor or fellow business owners who you can collaborate with to discuss your options.
