There is a statistic that about 95 percent of all small businesses fail somewhere within the first five years. Even some of the greatest names in the history of business, like Walt Disney or Henry Ford, faced a financial difficulty at one point in their careers, but they managed to bounce back. For new entrepreneurs, probably the greatest difficulty in this regard is finally admitting that your business is on a downward spiral. Once you manage to do that, it will be your job to try and salvage everything you can and here are a few ways in which you can wake up from this financial nightmare.
1. Hire a financial consultant
One of the first things you might want to do when facing a financial difficulty is – consult an expert. You can start by finding a renowned local accountant and letting them take a look at your books. Their opinion about your finances is probably the best way for you to determine whether to keep struggling or to declare bankruptcy. When looking for the right accountant, there are several things you need to look for, like a word-of-the-mouth referral, the certification they have and of course their professional portfolio.
2. Consolidate your debts
A recurring problem that most new businesses face is taking loans from several different sides. This can be particularly troublesome seeing how they may face different interest rates and a bunch of other slight differences. Another problem that you will have here is the inability to assign a priority to them, which further complicates the matter.
The best way to go about this would be to try and consolidate your debts. What this means is that you are replacing several smaller debts for one that is a bit larger, but in this way, you get a single problem to focus on. For this, you can either go to traditional lenders, like credit unions and banks or decide to explore local lending companies like NSW Mortgage Corp which entails much less paperwork and bureaucracy.
3. Reorganize your company
Another thing you may want to do is introduce some major changes into your management, seeing how chances are that they got you into this trouble in the first place. One thing is certain, business-as-usual simply cannot continue any longer, so starting top-to-bottom is an as good idea as any. In a case where you are working with a skeleton crew (5-10 people), even a single slacker on your sales team may cause your profits to significantly falter. This is why you need to start laying off and hiring new people. Sure, this never comes easy, but there are several ways to do this as painlessly as possible.
4. Declaring bankruptcy
Finally, you need to keep in mind that sometimes things will be well past the point of no return. Once this happens, your only choice may be to declare bankruptcy. Of course, there are several different types of bankruptcy that you should consider. Chapter 11 bankruptcy is an especially popular option for struggling startups, seeing how it basically gives you time to restructure your debts. Overall, you don’t have to think of it as a traditional bankruptcy, but as a chance to get a fresh start for your company. Furthermore, a lot of companies that file for it somehow manage to stay afloat.
As you can see, things usually aren’t as bad as they seem at first, but if you are to run a business, you cannot make decisions based on outside appearance or even your gut-feeling. You need an objective estimation of your company’s financial status. After this, it is usually for the best if you were to restructure your internal organization and consolidate your debts. Finally, being a person in charge also means that you are the one with a hand on the plug and you mustn’t be afraid to pull it if the situation dictates it.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.