In mid-February, the European Union was able to reach an agreement to provide debt-laden Greece with another bailout, calming fears of a calamitous default, if only temporarily. The bailout, worth approximately $172 billion, is the latest in a series of measures designed to keep the troubled nation financially afloat. Economists are divided as to whether or not these measures will solve the problem, but it’s clear that without intervention, the financial stability of the entire continent would have been at risk.
This saga presents a cautionary tale to business owners. The mistakes the Greek government made, while egregious, are mistakes that many business owners could relate to. To put it simply, while “times were good” before the global downturn in 2007, Greece took out loans that they had every intention of repaying. Unfortunately, the recession dramatically reduced their revenues, leaving them with the mess they are currently managing.
What can you learn from Greece’s mistakes?
1) Project growth conservatively. When your business is growing, it’s easy to assume that it will continue to do so. But that’s not the case—the fortunes of even the best-established businesses can change rapidly. Project conservatively and protect yourself in the event of a future downturn.
2) Be proactive. By the time you need capital, it’s typically too late to raise it. Be proactive—secure the funding you need to ensure the stability of your business, even if you don’t have an immediate need.
3) Use technology to improve cash flow. Inefficient cash flow is a major challenge for many small businesses, in particular. Take steps to improve this process. Give your customers the ability to pay online or by credit card, rather than writing a check and sticking it in the mail. It’s a small step, but it can have a real impact on your cash flow.
4) Educate yourself. Knowledge is power, and it is important to understand your options should you experience financial duress. Bankruptcy is a scary word for many business owners—but the process may allow your business to restructure, shed excess costs, and re-emerge in a better position than ever before. Contact a bankruptcy attorney to learn more.
Greece’s financial woes serve as a shining example of what not to do for politicians and economists—but business owners would be well-advised to take notes as well. It’s unlikely that your business will qualify for a bailout should you need one, so don’t put yourself in Greece’s position.
[Image: Flickr user Dimitris Papazimouris]