How Small Businesses Can Hoard Their Cash: 9 Ideas

Cash-saving tips for your new business.

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Especially in a recession when customers are scarce, the quickest way for a small business to raise cash is not to spend it. That might sound simple, but habits, including spending habits, can be hard to break.

Ask for Discounts

It should go without saying that it will help preserve cash if you shop around, buy in smaller quantities, and negotiate lower prices. When times are tough and suppliers are hungry for business, you'll be surprised at how many will lower prices if you ask -- but they're not going to volunteer.

Pay Less for Credit Card Processing

If you take credit cards, chances are that you pay your processor too much -- and so give up cash you need every day. As a general rule, if you solicit a number of bids and buy your own processing equipment, you'll save a significant amount.

Stop Paying for Equipment You Don't Need

When times are good, it's easy to commit to buying or leasing expensive equipment. Take a hard look at everything you own, especially items you're still paying for and sell everything you don't absolutely need. Cancel leases on nonessential equipment, asking to return it to the vendor. If no one takes your request seriously, don't be afraid to involve a lawyer, who should be able to convincingly explain that without quick cooperation, your business might fail.

Call the Landlord

Renegotiating a lease to get a lower rate is rarely easy. But if tenants in your area are thin on the ground, and especially if your lease will be up for renewal soon, chances are good that your landlord will give you a better deal if you push.

Even if you have a long-term lease, try to renegotiate. A landlord who sees that your business won't survive without a rent reduction may be willing to accommodate you. One possibility is to propose a significantly lower rent for the next year, with a built-in increase to kick in if and when your sales return to normal levels. But don't trade a short-term rent reduction for a significantly longer time commitment, because you can't know for sure that this adjustment will be enough to keep you going.

In exchange for a rent reduction, your landlord might ask for your personal guarantee, even if your business is a corporation or an LLC. Giving it could imperil your personal credit.

Sublet Unneeded Space

If your business is losing money, your real estate may now be your most valuable asset -- make sure it's producing every penny it can. Especially if your business downsizes, rent out unused space if your lease allows it (you may need your landlord's prior consent). You might even look at moving your business to another location and renting out your entire building. Don't overlook your competitors as possible subletters -- even formerly fiercely competitive retailers might survive by operating out of the same space or combining office, warehouse, or small manufacturing operations.

Stay Close to Home

If your business still does a significant amount of travel, cut it at least in half. Just committing to this will force you to focus on eliminating the less profitable trips.

Reduce Professional Fees

Handing out money at $300 per hour is no way to save your business. Ask your lawyer and accountant to give you a recession discount, and if it's not forthcoming, shop around for someone who will. Be sure you understand what your lawyer's minimum billing interval is. If it's 20 minutes (meaning you are billed for a minimum of 20 minutes for every call, no matter how short), bunch your questions together so you use all of the time you'll have to pay for.

Cautiously Cut Back on Insurance

In tough economic times, the last thing you want to do is eliminate essential insurance coverage for fire, theft, and liability. But it might make sense to increase deductibles and cancel nonessential coverage for things like business interruption or the death of a key employee. It makes more sense to scrimp on insurance if your business is organized as an LLC or corporation. If you are a sole proprietor or partner, you are personally liable for business losses -- protect yourself.

Renegotiate Contracts

Even if you've signed a contract to buy a product or service, negotiate your way out of it. If you are willing to pay a reasonable buyout fee, it's legal, honorable, and practical. After all, once clued in to your financial problems, the other party may be happy to accept a partial payment from you rather than risk receiving no payment at all if your business fails.

For more tips and ideas for conserving cash, see Save Your Small Business: 10 Crucial Strategies to Survive Hard Times or Close Down and Move On, by Ralph Warner and Bethany K. Laurence (Nolo).

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