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Recession Progression

Pretend that we could eat as much as you want, of whatever you want, whenever you want, with no consequences. What would a lot of people do?

Probably eat a lot of their favorite foods!

Of course, in the real world, we know that if we do that for any period of time, we’ll have to go on a diet.

That’s what a recession is – the economy going on a diet.

It’s just the business cycle. Things go well. People get over-exuberant. Too much debt. Bad investments. Then a recession gets rid of the excesses. It’s part of the evolutionary process.

So today, we want to discuss how to survive and thrive in a recession.

How to survive a recession

  • Develop a contingency plan.
  • Start by asking yourself, “What if …?”

    What if you get laid off?
    What if you have to work longer hours because other people got laid off?
    What if your time gets cut back?
    What if your benefits get cut?
    What if your business takes a hit?

    You know your situation. Think about the most likely scenarios and develop a plan for them. Then, do what you can now.

    For example, why put off updating your resume until you need it? Do it now! Most people wait until they need it. You’ll be a step ahead.

  • Watch your spending
  • Businesses cut spending to get through a recession. We should take a clue. Try to avoid making long-term commitments. In times of uncertainty, wait until you’re more certain before making major purchases.

  • Don’t panic.
  • Resist the urge to drastically change your retirement plan and other long-term investments. You need to look at the specifics of your situation. However, as a general rule, if you won’t need the money for five or more years, you should probably stay the course. Historically, that’s been the best thing to do.

    If you need the money before that, you may want to deploy another strategy. Check with your financial planner to figure out your best option.

How to thrive in a recession

  • Take advantage of low interest rates.
  • Interest rates tend to go down during a recession. So consider refinancing your mortgage and other debt. Business owners may have prepayment penalties, but it may still make sense. In both cases, you need to analyze your specific situation.

    Let’s assume you refinance. Use what you save each month to 38 build your passive income].

  • Keep investing in yourself
  • Once again, let’s take a clue from businesses. Businesses that thrive, after a recession, are often those that kept on investing, during the recession.

    There are a lot of opportunities once a recession ends. Position yourself to thrive – take a class, attend seminars, and go to conferences. You’ll build skills and make great contacts. One of those contacts may lead to your next bigg opportunity!

  • Look for great deals.
  • Once-in-a-lifetime opportunities may present themselves during a recession. People are often more willing to negotiate. You probably won’t find your great opportunity advertised anywhere.

    So how do you find it? Network, network, network! You’ll most likely be surprised by it, so keep your eyes and ears open. Your accidental discovery will be the result of your active searching!

Our Bigg Quote today is by an unknown author.

“A bend in the road is not the end of the road… unless you fail to make the turn.”

So keep your eyes on the road and your hands on the wheel. Be ready for detours so you don’t have to come to a screeching halt!

Next time, we’ll look at the question, “Does it pay to blame others to cover your backside?”

Until then, here’s to your bigg success!

 

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How To Get Your Customers To Finance Your Business

By Bigg Success Staff
01-18-08 

Bigg on Small Business

money_rose_jpg

You either treasure your customers or you go out of business. Ultimately, customers pay your bills, one transaction at a time. In addition to that, customers can finance your business.

Of course, all industries have standard protocols within which you must remain. Or do you? What if you thought creatively? What if you could find a way to win customers and get funding for your business at the same time?

Look at related industries for ideas. Do they follow the same practices as yours? Talk to your customers. What would entice them to consider a creative payment arrangement?

It may be that the customer helps finance your business by the strength of their credit and the commitments they have given you. You don’t care where the money comes from … as long as it comes!

4 ways customers can get you money fast, even if you have bad credit.

#1 – Customer deposits
Wouldn’t it be nice if your customers paid you in advance? Many businesses operate under this model, if you think about it! Even if only a portion of your revenue is prepaid, wouldn’t it make a huge difference to your cash flow?

A marina owner we know employs this concept. One of his primary sources of revenue is dock rentals. He offers his customers a huge discount if they pay for their entire year’s rental a year ahead. Most of his customers take advantage of this offer. He never worries about cash flow.

#2 – Purchase order financing
What if the customer isn’t willing to pay in advance? You may still be able to get funded upfront by using their purchase order as collateral. This won’t work for just any customer – they need to be a company with good credit. 

To turn this pre-receivable into funding, your purchase order must pass two tests. First, it must be non-cancelable and verifiable. Second, you need a gross profit margin of at least 20 percent.

This is not cheap financing – expect a discount between four and seven percent of the purchase order amount. However, isn’t 93% of an order better than no order at all?

You’ll need to pay your purchase order financier off once the order turns from a pre-receivable to a receivable. That’s where the next source comes in.

#3 – Factoring
If you accept credit cards, you’re familiar with the concept of factoring. You get paid now by a financier who gets paid by your mutual customer later. Factoring is only slightly different. 

Factoring can work in a number of ways – let’s assume that you want to completely outsource your credit and collection process. This is expensive money, but you don’t have to worry about payment. The factor takes care of it! You’ll need customers with good credit ratings.

Depending on a number of factors, expect a discount between one and fifteen percent of the invoice amount. Sounds expensive, doesn’t it? However, you won’t wait for your money. You don’t need a credit and collections department. You won’t write off any bad debt. Is it starting to sound reasonable?

#4 – Strategic partnering
What if your customer became your partner? This arrangement has worked for a lot of businesses. Be careful because your relationships with other customers may be affected.

We know a man who owned a specialty printing company. His largest customer was a fundraising company – they sold goods through organizations wanting to raise money. His customer wanted to offer a new product that required special equipment. He negotiated for them to pay for the equipment in exchange for a royalty on all sales produced by that equipment.

The customer effectively got a rebate on all their purchases of that product. Plus, a participation in sales from the machine they bought. The owner had a whole new profit center, with no financial risk.

So look to your customers if you need money for your business. You might get paid even before you make the sale!

How have your customers financed your business? Share your bigg ideas with us!

Hear today's lesson and laugh on The Bigg Success Show. 

(Image of money rose by kissthis, CC 2.0)

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