Being in financial debt – for too long – as a business owner can be frustrating and distracting. However, debt is not a bad thing; it can be used to grow your business, such as purchasing more items, expanding your product line and so on. The dark side of financial debt in business is that it can be overwhelming and too difficult to handle if the goals for debts are not met. Maybe you had borrowed money to invest in your business and the sales are not forthcoming, it can ruin your business if you aren’t watchful. Nevertheless, the debt trap is not the end of the road for any determined business. In this article, I discuss 5 ways to conquer business debt. Read more about Business
Increase Your Revenue
To pay off your debt, you have to create an extra source of income in your company. You need to raise the revenue bar for your business if you want to come out of your business. There are several ways to increase revenue. First, create promotions to generate interest from customers. You can have a special sale or pass out coupons. This can encourage people to buy more. However, watch the margins, otherwise, discounts might be counterproductive. For instance, you can put on notice that if a customer buys ten units of your product, he can get a discount of 10%. Or you can create a timeframe in which the promotion will last before the prices are returned to a normal level. Secondly, you can as well increase the price after you have done your marginal cost. If you have low margins, it is appropriate to increase the price. Beware of increasing the price without proper study of your customers’ buying behaviour. Price increase might scare customers away, however, you can amplify the value of products which might encourage them to continue their patronage.
Encourage Customers To Pay On Time
The best way to stay out of debt is to avoid excess credit facilities. However, giving credit facility is a way to grow your business, but you must put in place strategies that ensure quicker payment. One of the ways to do this is to shorten your payment terms. For instance, if you’re currently giving customers 50 days to pay their debt, you can shorten it to 25 days for future purchases. You can also track down late-paying customers and remind them of their debt. You might send them a reminder alongside your bank account number or payment platform links. In a case where they’re not forthcoming, you can give them options of paying in two-phase instalments, or get the authorities involved where there is a case of noncompliance.Sign up to the Connect Nigeria daily newsletter
Cut Your Costs
The debt period calls for austerity measures. If you want to pay off debt faster, you must cut your cost, especially those things that are frivolous in your personal life and those things that are nonperforming in your business. Reducing your spending will save you more. For instance, you might reconsider reducing the amount you spend on internet subscriptions, reduce your budget, or sell off excesses. In your workplace, you can downsize by cutting off nonperforming departments or selling off underutilised office equipment.
Prioritize Your Debt
Another way to get out of business debt is to prioritise the debts to get rid of. Therefore, examine which debt is critical and pay them off. There are ways to identify critical debts. Critical debts are those with severe penalties, with heavy collateral and are short-termed or need immediate attention compared to others. Some debts might destroy business friendship when they linger on. So, look at your options, weigh them and determine to pay the ones with severe consequences if they are not paid in due time.
5. Consolidate Your DebtConsolidating your debts simply means getting a loan to pay off your multiple loans. For instance, you can get a loan to pay off your debtors. Maybe you have collected goods on credit from various suppliers, you can approach your bank to get a loan on a long-term basis to pay off your short term debts. With time on your side, you can sell those products and repay your loans. Featured image source: Corporate Finance InstituteGot a suggestion? Contact us: editor@connectnigeria.com
