When you’re trying to establish or run a business in the middle of a crisis, you’ll hear a lot about protecting cash flow. In truth, cash flow is important, but flexibility is too. You want the ability to make decisions just in time, so you have the benefit of as many facts as possible. Here are five things to do to protect your business’s income during a crisis.
If you’re living or working in an area where the cost of living is high, it might seem to make sense to move somewhere that is cheaper. After all, housing and workspace rentals can be some of the highest single expenses for independent contractors. However, by moving, you’re cutting off at least part of your income and adding a ton of immediate expenses to the list. Moving to a smaller or cheaper area also limits the number of clients to replace your income. If it is possible for you to remain where you are and stay current on your bills, that’s probably the easiest way to keep more of your liquid assets.
Avoid Diving Into Expensive Markets and Luxury Services
If you were planning to move to an area that’s more expensive or start offering high-end services, it might be a good time to rethink these measures. While a lot of people will move from a lower cost-of-living area to a higher one because there are more jobs there, this doesn’t always mean you’ll be able to land them. During a crisis, when there are many more contractors seeking work than clients creating projects, it’s best to stick with the essentials. And in most cases, that involves sticking with the area you know and the work you can do with the least amount of complication.
Consider Multiple Viable Income Streams
When the immediate future feels highly variable, it is hard to tell how work is going to pan out in three months, six months or a year. If you’re only offering one service and it’s not in demand, or you suddenly have tons of other contractors to compete with for a limited set of jobs, it might be time to branch out. An economic downturn isn’t a good situation to leap into a market in which you have limited experience or ability. However, if you have services that you know how to do and you’ve already got the skills and credibility, it may not be difficult to add them to your business. Keep an eye on overhead and the supply chain, as those might have changed since you did these services before.
Keep Funds in Multiple Places
As a contractor, most of your assets are probably related to equipment and inventory. When you’re worried about future income and cash flow, you want to keep an eye on where you’re putting your money right now. Sure, you need to upgrade equipment so you can keep working on projects. Switching to rentals, minimizing your stock of inventory, or repairing equipment that you already own outright can help to keep your assets as liquid as possible.
Implement Practices to Maintain a Steady Income
Crises that trigger large-scale economic problems often bring out the scavengers, and you don’t want to get caught in a bad arrangement. It’s tempting to relax your payment intervals in the hopes that you’ll land more clients that way. And while giving clients all the time they need to make a payment is more likely to appeal to clients, you’re not always securing the right kinds of clients. Someone who is trying to take advantage of your worry to get a lax payment standard is probably going to make you fight for every dime. Following your original billing practices is the best way to ensure that the money keeps coming in.
Ensuring flexibility for your business doesn’t mean that you have to be flexible in your business decisions. In fact, it might mean that you’re less flexible than you were before, so that you protect your ability to make quick decisions later on. For more information on building a successful contracting business, contact CSLS today!