Knowing When to Borrow Money
Whenever we are in the brink of losing our business due to poor cash flow or low profitability, the easiest most obvious approach for entrepreneurs is to borrow money from different financial institutions, request for funding, or put more investments from our personal savings.
However, you need to assess the impact of these loans to your long-term survival. Your business is doomed to fail with this kind of approach. What you must do is review every aspect of your operations and start cutting down costs.
Initiate dialogues with your business partners or employees to solicit insights. They have more insights than you can possibly imagine since they have the right skills to handle the daily operations. More importantly, you will need their buy-in for any plans you will implement.
Your pricing strategy is important this time. Ask FSB Blog advises:
Charging too much money is a non-issue if YOU believe your price is fair and are providing a product and service on par with your pricing structure. If you feel like you are over-charging, then you most likely are. As you know, pleasing everyone is impossible; therefore some people will always go to the lowest bidder. You don’t want those customers anyway–they have no loyalty and don’t add value to your business. People ultimately buy from those whom they trust and like, making price a non-issue (within reason, of course)
If you have several product offerings, review each one carefully and assess the financial impact to your business. In some cases, there are brands that generate big sales but do not register profits due to high discount rates and free goods. Be aggressive, learn when to pull the plug on your products, and reboot your brand if needed.
As much as possible, do not consider borrowing money as your option to improve your business performance. Seek first to trace the problem areas and develop better solutions through cost cutting initiatives.
