Smaller companies are far more exposed to liquidation, which is often due to serious debt problems, especially when the company has just commenced trading.
There are ways an owner of a small company can avoid the likelihood of liquidation by using some basic debt management tips like the following.
Tip 1 Buy Used Equipment A small company can get a step ahead quickly by purchasing second hand equipment.
This could be anything from office furniture to computers to tools or any other equipment that is essential to ensure a successful start up.
This can save a business 75 percent in cost terms.
Tip 2 Savings Should be Secured An astute business person will always have personal savings set aside before venturing into business but these should only be used out of sheer desperation.
If you need to put a little extra money into some enterprising aspect of your business which you know will be a success then you can always pay it back later.
Tip 3 Use Friends and Family This depends, of course, on your relationships with the people around you, which are normally your family and friends.
They may be interested in helping to finance you, especially if you have been refused backing from a financial institution.
It is quite surprising how your closest contacts might have faith in your impending success.
Tip 4 Use Angel Investors These are eager investors who will want to gain a share of your company if they provide equity for it and they may also want some operational control, too.
There are databases on-line of people who have money available that they wish to invest in a viable enterprise.
Tip 5 Conduct Market Research The greatest reason for company liquidation is lack of market research into the position of the product being marketed in the market place.
Relevant market research provides notice of any pitfalls that may occur when marketing your product.
Tip 6 Keep up your Personal Income It is not uncommon for those who are starting companies for the first time to still work in their usual occupation.
This means they still have an income coming in while their business is establishing itself.
It gives you a chance to build up a cash reserve, just in case you need it.
Forgoing your job can take place once you start to reap reliable cash benefits from your business.
Tip 7 Be Frugal on Equipment Requirements A small business may not require a full range of equipment straight away or even office supplies.
Orders should be kept to a minimum until business picks up.
Tip 8 Be Flexible A small company means flexibility is needed.
For example, it may mean you find yourself storing your product at home or in a storage unit and then selling your product on-line.
It is much harder to run up serious debts when you operate an on-line business as there is much less capital investment required.
Expansion can be invested in if the business prospers.