Imagineering: A Seasonal Cash Flow Cliff
It is that time of year for (entrepreneurs) more stress, worry and fear.? Bills need to be paid, purchase orders are drying up and little income is actually being received or further delayed somewhere along the chain?
Meeting payroll is becoming critical, as you near your credit limit your existing lenders are being unhelpful and are actually thinking about reducing their “exposure” to your sector…brilliant timing?
You rather naively and optimistically thought that by now you would be sipping a Pi?a Colada on a beach in the land of milk and honey; somehow it quite never worked out like that?? You were prepared for it to be hard but not quite this hard?
Sometimes start-up bootstrappers can provide useful ideas and inspiration for larger firms? It helps to be nibble and full of trial and error ideas.
So if you have a large wage bill to settle but not enough pennies in the piggy bank try one or more of the following as a starting point – just in case they help?
1.????? Talk to a Commercial Finance Brokerage specialising in cash flow funding to see if they can urgently “blend” of package of funding for you on more attractive and flexible terms?? You can obtain help via members of the following Trade Associations here: https://nacfb.org/ and https://www.fiba.org.uk/.
2.????? Sometimes small entrepreneurs may have an informal network of family, friends and close business associates with access to informal “private dark money pools” on fair lending terms and on a reciprocal basis.? Just to be clear this is not a reference to loan sharks (which do exist in the real world – avoid like the plague) but contacts, for example, that have SSAS Pension Funds, SME savings and investment accounts and other “near money” assets/investments that occasionally lend to one another informally?
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3.????? Would it be possible to renegotiate terms with some of your key suppliers – delaying payment slightly – and a few large clients – asking for part or all payment of the outstanding debt sooner or in advance?? From experience, if you have genuinely good relationships with both they may very well try to accommodate your request – with you reciprocating in the future, when they themselves too need a helping hand?
4.????? The vast majority of employees are diligent, hard workers and have a vested interest in the business continuing to not only exist but also to grow.? Depending upon your business culture, particularly if it has a “mom and pop”/family business air then it may be time for a sit down and (diplomatically) have a frank conversation to explore if there are any creative ideas (that you and they can come up with) as to whether the temporary cash flow hiccup can be addressed?? Ideas, such as: partial delayed payment of wages until there is sufficient cash reserves to retrospectively settle the remuneration bill with a small bonus (as a sign of gratitude – with you setting the example by foregoing your own salary until all the staff are fully recompensed); temporarily extended holidays in lieu of pay; for the business to treat the “waiver” as a quasi-loan to it on normal commercial terms (that is, as an informal business loan from the employees, repayable over a mutually agreed period with interest); equity swap – the business gives (with expert help from your trusted advisors) shares in the business in lieu of any wages forgone but retaining the option to buy them back when the financial situation improves); “stock”/inventory instead of wages for certain types of business sectors like, retail, leisure and hospitality (example: front of house staff being given “free” gourmet meals for ?themselves and their families or luxury holiday accommodation/free use of facilities for agreeing to temporarily lower or partially delay wages); and, extended holidays above any contractually agreed and statutorily required days?? With these creative ideas the objective is always to offer much more than the actual wages forgone/delayed – as a sign of good faith.
5.????? Are there any tax rebates, business allowances, grants, soft loans (including for and by staff themselves – such as social security entitlements yet unclaimed) that can potentially be reclaimed retrospectively – although it is unlikely to provide an immediate cash flow boost, nevertheless it may be worth exploring in order to build-up medium-term reserves?
Sometimes in business life, you just have to make and mend, there is no panacea, no magic beans/“bullet”, no “perfect” solution – just keep trying, keep failing, and then keep trying…maybe, just maybe you may come across a solution that works for you?? Do not give-up hope – there is always tomorrow!
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Kip
The EBO Guy
…Acquiring businesses for employees