Increase your capital during a crisis
When your business is under financial pressure, you could have assets to convert into cash (liquidized/sold) to bridge the gap until the business recovers.
As a cash flow crisis can be stressful when it happens, you may need to act fast. Maintaining an accurate asset register ensures you’ll have up-to-date information to consider what you may want to sell. Carefully review your balance sheet for opportunities to free up money and talk to your accountant or business adviser about your situation before making any decisions.
Look at the following types of assets in your business:
1. Current assets
This category covers any items that can be quickly sold and converted to cash. If you don’t need to repurchase these items to continue to operate, you could use the money to pay for other more immediate costs to buy you more time to recover.
- Account receivables to collect
- Existing inventory
- Raw materials
- Manufacturing and packaging supplies
- Short-term investments that mature in under 12 months
- Funds in offshore accounts you can bring back
If in the past you’ve held excess stock and raw materials to take advantage of bulk discounts or efficiencies, look at reviewing your processes to only order ‘just-in-time’ to lower the volume you hold.
2. Fixed or long-term assets
Fixed assets are usually the more expensive items you’ve purchased to run your business and typically last more than one year. Think about taking the opportunity to streamline and sell anything you no longer need.
- Excess technology
- Office equipment and furniture
- Long-term investments
If you own property, land, equipment or vehicles that are still needed, you could sell the asset to free up capital and then lease back. It usually costs more in the long run to lease an asset than own it, but you’ll get an immediate injection of cash to help keep you afloat.
If you do find your circumstances continue to decline, you may need to scale down to a skeleton operation to keep the business running. It’s a balancing act between having the cash to survive without hurting your business permanently.
3. Intangible assets
These assets tend to be harder to value as they include intellectual property (IP), goodwill, brand and your business ‘know-how’. They are worth something to your business but are much harder to unbolt and sell-plus possible buyers are in the same industry as you so they could also be hard up for cash.
Common examples are patents, trademarks, designs, informal agreements, or customer contracts that could be sold to another business. Because your IP is inseparable from the value of your business, this should only be used in extreme situations.
4. Other business interests
Review any part of your business you don’t need that could be sold without disrupting your core business. If you have several locations, branches, or offices it could be possible to split them off and sell or close and liquidize the assets. If you have an under performing part of the business or have expanded into non-core products or markets, now could be a good time to focus your business on what you do best.
Remember the liquidation value of an asset will most likely be below market value, so carefully consider all your options before you sell off your most valuable assets to keep things running. Seek legal, financial and business advice if you’re making decisions that impact your long-term future.