As an old adage goes, you can’t repair a leaky roof while it’s raining. In a similar way, you often can’t prepare for a financial problem while the problem is happening. For this reason, your business should work to prepare for emergencies now, when the sun is shining. Preparing your business for a financial emergency may bear many similarities to preparing your personal finances. However, there are also many differences. You need to have a firm handle on where you’re spending your money in order to control it. Here are some of the other things that your business can do in order to prepare for a financial emergency.
1. Lease Versus Own
In many instances, it just makes sense to lease your business equipment instead of investing in the purchase of it. This could be because the equipment is going to age faster than you can save up for the purchase of new equipment or because you only use it occasionally. There are exceptions to this rule for some of your equipment. It may be more cost effective to shell out the expense and save money in the long run if you will use the equipment frequently. Purchasing makes sense for things that aren’t going to become outdated quickly. Purchasing also has the added benefit of being a fixed cost. This will help you to keep your budget in-line with the needs of your business. Weigh the pros and cons of each situation before you decide the best route for your company.
2. Know Your Risk
Knowing your level of risk can provide you with the knowledge that’s required to weather any storm. For example, using a business credit risk management service can prepare you for a downturn in the economy. This will allow you to budget for the things that will help you to stay afloat and come out ahead. Knowledge is power because awareness gives you the opportunity to make changes to your business model before you have to decide if closing up shop is the right move. Another bonus with this type of service is that you can evaluate your vendors. By knowing your credit risk, you will be more able to see where the gaps are in your current strategy. Understanding this is key to preparing and fixing problems before they start. Know your risk so that you can reduce it.
3. Negotiate for Success
The best way to save money is to engage in the negotiation process before you sign a contract. Be involved and do your research beforehand. This gives you more leverage at the table. Negotiating successfully can also work to your benefit to decrease your overhead costs. Budgeting for the higher price allows you to set aside the cost savings difference. Having this money available gives you a buffer in case of a financial emergency. You may even be able to negotiate on your lease if the building has been designed with a single tenant in mind. The cost of renovating could motivate them to keep you around.
There are many things your business can do right now to prepare for financial emergencies. It can be difficult to predict what will happen in the future, but this is absolutely necessary for any business. Your business needs to use an evolving model so that you can project any financial problems. By projecting and predicting, you may be able to avoid emergencies in the first place. Even if worse comes to worse, you will be able to handle problems calmly and efficiently. Use these tips to help you stay in business for the foreseeable future and prepare for financial emergencies.
Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan