Hello all, What would be your advice to the owner of a small hardware store that has no cash, no access to credit facilities and who is owing suppliers but can't pay. The suppliers are now demanding cash in advance payments. Inventory is stagnant as he can't replenish stocks and customers are just not buying! If they come to buy he doesn't have what they want due to him not being able to purchase it from his suppliers. He may get some money borrowed next week. If he does then should he use it to pay off suppliers? He is thinking of paying them a bit week by week, and using the funds to re-stock the business so he can attract customers. Would this be a sound strategy? What about if he restocks but sales doesn't hold up? My thinking is this is a good short term strategy, but how can he prevent this happening in the future? Thanks! Ravi
Cash Strapped Small Company
Answers
I also do a small online business. I have applied a very successful strategy. It may take some time but definitely work.
The owner should obtain the loan and firstly he must invest it in those items who have high demand. Those items can be sold easily. Then he must build his store around these items. Which means the items in high demand will be sold regularly but he must add other items which may have higher profit ratio.
It will take time but definitely will work. I have my personal experience with this.
Low-Budget Marketing Tactics for Cash-Strapped Small Businesses:
1. Develop a Referral Program
2. Partner Up
3. Apply for Business Competitions & Awards
4. Get Remarkable Business Cards
Why throw good many after bad money? Doing so with his own money is not smart. Doing it with money that he borrows - and knowing that he will not be able to repay such loans - is criminal.
I am surprised that "printing attractive business cards", strategies to raise funds, adding products with a short shelve time, and other "time consuming" possible solutions are mentioned. Nobody seems to be asking the obvious question: Does this business actually make a profit, and if so, can the owner live on this income and pay the rent for the business?
I agree with Werner, in that the battle may already be lost if the owner has pissed off their suppliers to the point that they are demanding payment upfront.
It begs the question of where did the cashflow from the business go, to-date, and if the business as a whole is even worth persisting in.
Is there anything in their assets they can leverage? Are they having cashflow issues due to uncollected receivables ( maybe they can factor their AR ) ? Are their expenses too high?
If this owner intends to persist, and has to prioritize where to spend what little cashflow is coming his way, I will agree that getting in inventory that will a) sell well, b) have high margins is as good as any place.
Good luck to them.