Question: We run a recording studio and are having real trouble paying our bills. Our customers are mostly local musicians and advertising agencies. What can we do?
Answer: No time for the blues. Take action. What are the causes of your cash shortfall? Are your expenses too high? Your customers slow- or no-pay? Your prices too low? Are your billing and collections disorganized? Did you buy cool, high-tech equipment that sits idle most of the time?
Compose a plan to fix your problems. The plan has four movements: generate revenue, reduce expenses, speed up incoming cash and slow down outgoing cash.
Some ideas: nonrefundable deposits to reserve studio time, payment in full before the product is given to the musicians, selling unneeded equipment, billing credit customers the day after their studio session, and looking for new services to offer to new customers.
Rank from high to low all your competitors' prices. Set your prices at the midpoint of the top one-third of this ranking. Raise prices in steps. Take bigger steps with those services that are priced furthest below the competition's.
Buy time for these changes to kick in. Ask your landlord to reduce or defer rent for a while. Can you convert some past-due bills to longer monthly payouts? Reduce every expense that won't harm the quality of your product. Who might lend or invest in your company or guarantee some creditor payments in exchange for recording services?
Eliminate surprises. Anticipate and act on problems with a rolling six-week cash flow projection. Make your cash flow break-even point your weekly goal. And don't hide from your creditors.
Make only promises you can keep and keep all the promises you make. It won't be pretty. Be prepared for abuse and threats. Keep your temper. Be positive and confident.
George M. Dawson (firstname.lastname@example.org) is a small-business consultant and author of Borrowing to Build Your Business: Getting Your Banker to Say "Yes" (Dearborn, $16.95, 800-621-9621). Send him your financing questions at email@example.com