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Part 2 – Build up liquidity

In Part 1 of this series, we mathematically determined the survival time of your business or self-employment. Depending on the results, we have determined that it makes sense to take different measures. If you haven’t read the article yet, or if you haven’t done your math yet, you can get to Part 1 of our series here.

You’ve already got it all set up and your math shows that liquidity building is your next topic? So in this part you will find an overview of different possibilities and a few examples for inspiration. Of course, the list is not exhaustive and you may have to adapt the examples for yourself, etc.. Ideally, however, this part can inspire you to create liquidity, even outside the classic 0815 possibilities that one might think of first.

This part has the motto: You don't have to make money, you have to have money.

So it doesn’t matter for the liquidity if the single measures are profitable, the main thing is that you are liquid, so you can buy time, grind your concept and prepare everything to earn every necessary sum again in the future. Here we have summarized different possibilities in different areas for you.

Area 1: Financing

In this area fall all the ways in which you borrow external money. These can be, for example:

  • Traditional bank financing
  • Financing via the bank with special programmes (KfW, …)
  • Financing via suppliers
  • Venture capitalists who give you a loan
  • Financing of goods
  • Financing of purchases
  • Combined procedures such as sale-and-lease-back

Area 2: Participation

This area includes everything where you give away shares in your company for liquidity, either in addition to interest or completely instead of interest. Often you will find such opportunities in the field:

  • Venture Capitalists
  • Redevelopment Fund
  • Mittelstandsfonds
  • Especially for smaller companies: Family & Friends

Area 3: Transforming (hidden) reserves

In the course of time, values have accumulated in most companies that one does not think of at first glance or that have already been further depreciated in the accounts. This is where liquidation opportunities often arise.

  • Selling a paid car and buying or leasing a cheaper one
  • Sell business property and rent it back (possibly also to a new (partly own) company)

Area 4: Reducing stocks

One of the most important areas, as it is easy and quick to implement.

  • If you have stocks, especially of goods ready for sale or large quantities of raw materials and supplies, you can significantly reduce these stocks and buy liquidity.

If you determined in Part 1 that your crisis is an externally caused, global crisis, it makes sense – with a severe liquidity squeeze – to sell off more inventory. The reason you can sell off more on a global scale is, for one thing, it’s much harder to predict how the economy will pick up and how much inventory you’ll even need immediately. Secondly, due to the global scale, many other entrepreneurs probably have the same problem. If you have sold too much stock and your suppliers are now taking too long to deliver, you will probably be able to quickly find other entrepreneurs who will be happy if you take some goods from them.

The best way to do this is to look at 3 possibilities

  • Cheap and fast delivery to remaining stock dealers
  • Market yourself online
  • Get marketed online and share revenue

Area 5: Increase revenues in the short term

This is about making (more) money quickly, the business doesn’t have to be as enjoyable or profitable as it normally would be, the main thing is it gives you extra financial survival time quickly.

Example or possibility mainly for sole traders / individuals

Briefly write down what you have done so far and list your strengths and interests. A quick post in all the relevant facebook groups for virtual assistants and you stand a chance of getting a few enquiries.

Because even if your business is under attack right now, you are still a person who was willing to take more risk and responsibility before. If an entrepreneur needs help for a few hours with some task, he has a good chance to secure you as a high quality worker, which he would not have been able to get so easily otherwise.

The typical range in these groups is between 20-50‚ā¨ per hour for more demanding jobs. For simpler tasks, such as pure research etc., the pay is correspondingly lower.

Example for small to medium enterprises

Check which of your services are individually needed elsewhere and market them directly. An example from one of our customers. A client (roughly metalwork and construction industry) came to us because their orders had decreased, especially in the areas where the technical draftsmen and planners were needed. The decline was so great that at least one out of every two people in the field would have had to be laid off in short order if nothing changed. We then prepared everything to use a small marketing campaign to write to companies that were either too small for such a department or that always had to cover peaks, and offered the construction service there as an independent service. Previously, this service was only used in the background for customer projects, but not marketed individually.

Already 2 months after the first advertising run the resonance was so large that even new coworkers had to be recruited explicitly for this service, since then the supply of individual construction services by order is there a firm division.

Area 6: Subsidies / aids, etc.

Of course, you may be eligible for some kind of aid or grant or whatever like that. If you have claims of this nature, applying won’t hurt. However, the area is deliberately placed last. Because experience shows – contrary to most assumptions – this is more the cherry on the cake than the cake itself.

Why?

As an entrepreneur, I need two things from my counterpart for planning.

  • Reliability in the matter (it must happen what someone says) and
  • Reliability in time (it does me no good if it happens in theory, but no idea when).

Now if you look at public things, they have often been reliable in the past in terms of substance, but slow and hard to gauge in terms of duration.

If you look at the current crisis measures, they are neither reliable in substance, in some cases, for example, conditions change afterwards, nor are they reliable in time, in some cases, for example, payments are currently delayed by months.

So if something is neither factually reliable, nor temporally reliable, I don’t base my planning on it.

Your plan has to work in spite of the politics, not because of the politics.

Only then you are independent and with full pockets and a full account, it is easier to complain loudly and rightly.

Or would you like to put your life’s work into the hands of those who were responsible for planning Berlin Airport. ūüėČ

Outlook

In the next part we look at strategic planning for the future, when does it make sense to run the business the same as before, when do changes need to be made, when might even new business models be needed altogether.

Since most are currently still in crisis-fighting mode and it is first important to build up liquidity, we are adding more examples here in the short term in this part and formulating more of the examples as soon as more companies go into planning mode, we will prepare the third part.

Here you can find all articles about the series:

Crisis management for small businesses and the self-employed Part 1

Sebastian Richter
Sebastian Richter
Sebastian ist Inhaber und Gesch√§ftsf√ľhrer der webRichtUng GmbH.

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