Many small companies struggle with the debate about when to double down and work harder to achieve growth and success and when to let go.
Before the Covid-19 pandemic hit, many companies were already teetering on the edge of collapse, and all it took was one or two months with no income to fold the business.
The companies that had financial buffers or who acted quickly to furlough staff were the ones to survive the lockdown and come out on the other side.
The main question you need to be asking yourself continually is this: When is it time to let go of a failing business?
The answer is not as easy as it may seem. When entrepreneurs are starting a business, it is often out of passion. These are the guys who tend to hold on for longer than they should do.
Borrowing money from sources that you possibly cannot pay back is a classic mistake.
1. If you have to borrow money from friends and family without detailed contracts in place.
2. If you are getting your elderly parents to sign surety with their retirement or home.
3. If you are going to multiple financial institutions for help and being turned down by many of them.
4. Borrowing money using your business to pay your living expenses.
5. Going into overdraft to pay for consumables that cannot ensure a sale or income in return.
There are some good reasons to borrow money for the business:
1. If you borrow money to buy the stock when you already have a sale or purchase order in the pipeline.
2. If you invest in equipment that will produce a product or service, you can also sell and repay the debt.
3. If this is a side hustle and you can repay the monthly installments with another source of income if it fails.
It is often better to speak to a neutral person about your business to get an honest assessment. Often, talking to friends and family is not a good idea, as they tend to agree with you or give you the answer you want to hear.
Instead, make an appointment with a consultant or banker to discuss the business and map a plan for growth.
For more information on how to grow your business with finance available to small businesses, contact us here: https://bizcash.co.za/contact-us/
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