Survive or thrive? How to maintain profitability in all business climates

When you have been running a business for any length of time, you know that there will always be ups and downs – no matter whether you’re navigating broader economic challenges or operating in a market that is characterised by seasonal demand.

However, some companies seem to be able to handle the quiet seasons better than others. If your business strategy is only suited to smooth sailing and not resilient enough to handle the rocky patches, you may be setting yourself up for failure – or at the very least risking your reputation due to disruptions in service delivery, missed production deadlines, quality breaches, late payments and so forth. Reputational damage could negatively impact your ability to bounce back when the going gets good as you may no longer be able to attract the top talent, win new contracts or maintain your overall competitive position in the market.

Here are some recommendations for how you can keep your business healthy in every business climate.

Be agile not frugal

Optimising your day-to-day operational costs is critical when you’re dealing with fluctuating demand. Everything from your staff complement to your stock levels need to be carefully planned to ensure you are not tying up much-needed cash when demand flattens.

However, it’s important not to rein in your expenses to the point where you stall your own growth. Ideally, look for ways to introduce more agility and scalability into your resource planning. For example, you may consider a managed staffing or seasonal labour solution, renting equipment rather than buying it, or pay-as-you-go IT resources (such as software and business process applications on the cloud, which can scale to suit your budget and business needs).

Be pro-active not re-active

In some industries, it is easy to plan for times of feast and famine. For example, a company that offers seaside accommodation would be well-prepared for lower revenues during the colder winter months.

However, not all ups and downs are that easy to predict; and this is where you can really put your business in danger – should a sudden drop in earnings catch you unawares. In this case, you could analyse your data to see if you can identify demand patterns, as well as keep up to date on developments in the local and global markets that could spell trouble for your business. Forewarned is forearmed.

Keep nurturing your relationships

No matter whether you’re selling business-to-business or business-to-customer, keep your relationships with your clients, suppliers, distributors and other stakeholders current and healthy, even during the slow months. The last thing you want is to waste time re-connecting when a busy season rolls around. Stay in touch and you’ll remain top of mind.

Maintain a healthy cashflow

Without a steady cashflow, your business can’t meet daily running costs, let alone capitalise on new business opportunities that come your way. Ensuring that you have access to working capital when you need it is therefore not only a strategy for surviving the tough times, but also a tactic for taking full advantage of spikes in demand when they do occur. With cash at hand, you have more flexibility to step up production when the market recovers.

That said, it can be a challenge to access cash when you need it, especially when the entire economy is putting on the brakes. Qualifying for a bank loan can be a long and frustrating process, during which the bank will review your company’s financials, assets and liabilities, and credit history.

Fortunately, there is a faster way to access the working capital you need. Factoring is a financial strategy used by a wide range of businesses around the globe. Sometimes referred to as “accounts receivable financing”, factoring involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, known as a “factor”. The factor then collects payment of the invoices directly from the business’s clients. Essentially, factoring gives companies the ability to draw cash back into the business when it is needed, rather than wait out invoice payment terms – which can run into months.

Unlike a bank loan, a factoring agreement unlocks working capital quickly and you do not incur debt when you factor. Also, you’re qualified for the funding based on the quality of your customer’s credit rather than the strength of your own balance sheet.

Do you have what it takes to succeed in every season?

At Merchant Factors, we understand that you have unique needs during each business season. Founded in 1988, we are a well-established yet totally independent finance house, which means that we are agile enough to provide businesses with innovative and relevant working capital solutions when they are needed – ranging from factoring to stock and bridging finance.

We also understand that you can’t afford to put your business goals on hold. This is why Merchant Factors offers you the fastest turnaround time in the industry from application to pay-out.

For fast, flexible financing – contact Merchant Factors today.

Finance beyond the Numbers.