Last night I presented at a Business Link seminar titled "Beat the Crunch". Following the presentation it was clear from the questions asked that there is some concern in amongst SME owners as to how they may be effected by the current economic climate. I was also surprised that some of the business owners were activley looking to grow and were seeking financing for their expansion plans.

To help your business survive the credit crunch there are a few things that you can do. Over the next few weeks I will be posting ideas to that may help.

Review the businesses health and identify risks

One of the main reasons for business failure is lack of cash and general liquidity (the ability to raise cash for working capital purposes). At times where credit, from banks, is in short supply it is vital that business owners plan both the use of available cash within their business and the future cash requirement.

A good cash flow forecast will ensure that cash requirements are planned and that there should be no unexpected surprises. A cash forecast will also highlight any future cash requirements for new or replacement assets.

Credit control is also vital, ensuring that customers pay you when they are supposed to. This provides two benefits in that it makes cash available to you and also helps to avoid non payment because of business failure.

Business risk can arise when a business is too reliant on one customer or supplier. Trying to spread business out amongst suppliers or having a standby option will help to reduce supplier risk.

Customer risk can be reduced by finding new products to sell to existing customers, by selling existing products to new customers or finding new uses for existing products (new markets and customers).

Another business risk that needs to be reviewed is a drain of cash by overheads that are not being used / fully used within the business due to the drop in levels of activity. Overheads and staffing and employment costs should be reviewed on a periodic basis to ensure that they are being used. (Before taking any action to reduce staffing costs professional advice should be sought in terms of redundancy and the process.)

Check back soon to read my next post!