How would your business fare if the industry drastically changed, the economy took a major tumble, or increased competition took away customers? Ideally, a company would revaluate, adjust, and find another way to increase market share and provide a profitable service or product. A restructuring process like this might take 3 months or longer. The question then becomes how a corporation can stay afloat during a transition period when business is light.
Many businesses, without adequate funds or debt capacity, would fail before they were able to adjust strategies. However, with some forethought and smart investing, a wise finance manager can ensure the company is prepared to whether a storm with a war chest. And if that storm doesn’t appear on the horizon, well-invested funds can be a great asset to put toward acquisitions.
The first step to any project of this nature is to assess the goal and what is needed to reach it. How much money would it take to run the business for a few months? And how much of that could be covered by a business loan? Keep in mind that the same factors that would affect your current business would also affect loan availability.
Once an amount is decided upon, a plan of action must be put in place to raise this money and find an interest-earning place to keep it. Angie Mohr at Numbers 101 has an interesting article that discusses these next steps. It’s well worth reading for anyone looking to put some profit away for future use.
With a goal and a plan of action, business investment can be a definite asset. Is it time for your corporation to start a rainy day fund?