You likely already know that many small businesses will eventually fail. By year four, small businesses have a 44% failure rate. This number keeps leaping upwards with every year that passes. Of course, they fail for several reasons, but a lack of funding is a big reason.
Many entrepreneurs underestimate the amount of capital they need when they initially start. They also don’t consider drastic market changes. Finally, they don’t have the capital needed to pivot and adapt when needed.
You need a plan B, and you’re going to learn how to get one.
It’s Not Funding Its Cash Flow
Funding alone is rarely a problem. Instead, 82% of small businesses that fail do so because of cash flow. Sometimes it’s a case of poor management but often it’s due to not understanding the way customers in your market work.
For example, most corporations pay invoices after 90 days. They do this to maintain their own cash flow.
Therefore, you shouldn’t put all your eggs in one basket. Don’t rely on a single type of funding to save you. Look at multiple sources.
Don’t Leave it Until the Last Minute
You need a plan B because if you’re scrambling to make payroll you have fewer options. Unless you have family and friends available, where are you going to find funding at short notice?
Your plan A and plan B should have points in place for regular funding options. Don’t just plan for the money you need now plan for the money you might need if a crisis occurs.
Use Your Existing Contacts to Create Parallel Plans
Are you not committed to Plan A because you’re directing some resources to alternative plans? No, that’s nonsense. You wouldn’t join a poker table and immediately go all in, so why would you do that with your business?
One of the best ways to create a parallel plan is to utilize your existing contacts to generate additional income.
For example, work with your distributor to see if you can put your product into new markets. Another example could involve taking a feature or service from one of your products and selling it as a standalone product.
This is one of the best plan B solutions around. You’re always working on plan B and you’re advancing your business at the same time.
It’s a great way to avoid becoming stagnant.
Know Where to Go
Always have contacts in place for where you can pull funding when you need it. Consider companies like Thinking Capital. Connect with organizations like these now so you always have a ‘go to’ option when your business needs to switch from plan A.
Last Word – Keeping Your Business Going
The underlying message is that your business should always plan for the worst. Anything can happen in business and the things that are outside of your control shouldn’t have the potential to destroy your company.
Compile a plan B now, and don’t be afraid to also advance to a plan C and a plan D.
Does your business plan for the worst?