No business owner likes to face the prospect of debt, but it’s likely to happen at some stage. In fact, it’s likely more severe than you might initially think.
According to statistics from 2016, the average small business owner in the US suffered from $195,000 of debt. Now with the recent coronavirus crisis, even more companies are going to be hit with significant financial troubles.
If your business is currently in debt, read on for some helpful advice in this guide.
Reduce expenses
When it comes to reducing expenses, there are, thankfully, a number of different potential avenues you can go down.
First of all, come up with a list of services and costs your business simply cannot do without. Then it’s a case of trimming the fat. Are there any subscriptions not worth the monthly fee? Can you make the tough decision to let an employee or two go? Maybe you can find more budget-friendly utility providers available?
One of the best ways to reduce spending is with your marketing efforts. You can still put together an effective promotional plan with a reduced budget – you just have to get creative. For instance, engaging, free-to-create social media posts can produce better results than paid ads.
Increase sales
Easier said than done, right?
Yet in an ideal world, you would reduce your expenses while also increasing sales concurrently.
To do this, consider the following tips:
- Target other markets: Do your products have the potential of selling in different markets? Are there other products you could add to your product lineup? It goes without saying, but targeting more people will naturally increase sales figures.
- Offer deals: Even something as seemingly innocuous as ‘10% off’ can significantly enhance sales numbers.
- Get rid of surplus stock: Have a product that isn’t selling well? At this point, it may make sense to drop the price significantly to shift any remaining stock. Once it’s gone, you can focus on more profitable products.
- Provide better quality: If you deliver products and services with better quality, this will improve word of mouth about your business, and also the chances of customers turning into repeat ones. Improving also doesn’t have to cost much – it could be simply answering inquiries quicker or offering additional payment options.
If you cannot boost sales, there is still an opportunity to step up your company’s revenue numbers. This can be done by increasing the price of your products. However, you have to ensure you don’t push the numbers up too far. If you do, you run the risk of alienating your current client base and scaring off potential customers.
Additionally, upselling to customers is another effective revenue-boosting method. If you manage to find ways of getting existing customers to spend even more with your company, this could be the turning point for your financial misery. Look for incentives, additional services, and products, which can be added to what you’re currently selling.
Communicate with creditors
Creditors come in all different shapes and sizes, but you might be surprised at how willing they will be to negotiate your debt. This starts by contacting them and discussing the issues you are dealing with at present.
Admittedly, going out of your way to get in touch with creditors is a tricky step to make. It’s much easier to simply stick with making your payments as scheduled. Yet if you don’t ask for help, you’re not going to receive it at random. Plus, if there’s a possibility of securing better interest rates and extensions on payments, why wouldn’t you take the chance?
As mentioned already, that chance is one that has a likelihood of happening. A creditor wants to receive the money they’re owed, but they also want to avoid jumping through hoops for it. If they feel you’re going to go out of business, and have no money coming in as a result, they will realize any sort of monthly payment will be unlikely to come their way.
Ultimately, from their point of view, any payment is better than no payment. Use this to your advantage and negotiate a better deal with your creditors.
Hire a debt law firm
When you are attempting to wipe that debt away, enlisting a law firm likely won’t be something that popped into your mind. Surely the fees for hiring a law firm would only add to your financial woes?
In actuality, it’s typically the opposite.
Think about it: if you receive expert legal advice, you will be able to handle your debt issues better. Going it alone is likely to land you in a position where creditors further strengthen your hold over you. With debt specialists fighting your case, however, you have a much greater chance of reducing those bills.
So much so, that the debt reduction will generally succeed the amount of money spent bringing a law firm on-board.
This is particularly the case if you face a lawsuit from a creditor. If you hire a lawyer that is known for offering one of the top best lawsuit legal services for debt, they will be able to negotiate the best deal possible and reduce your debt in the process.
In fact, an attorney may even take your case on for free if they feel confident in winning a lawsuit. This is because they can have it so the plaintiff covers their legal fees once the case is resolved in court.
Sell up
It’s not something you want to think about, but the situation might be so dire that it causes you to consider selling the business.
Instead of selling off assets one by one, it’s a much more straightforward option to find a sole buyer for the entire business. Plus, it comes with a couple added advantages. Firstly, you could generate more money by selling the business as a full package. Secondly, it can instantly free you from financial obligations relating to the company.
With that said, this isn’t a viable option for everyone. For instance, if your company has debt that surpasses the value of your assets, it could be a hard sell. Yet it’s not impossible – particularly if the business has a strong brand that is respected by your target audience.
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