When first starting your business, you probably never dreamed of dealing with the challenges of paying off large amounts of business debt. Researching the market and creating a powerful business plan was supposed to be sufficient to raise capital.
Capital for launching your business is usually the catalyst for overlooking debts. Unfortunately, business is like life, unpredictable and full of twists and turns. According to a U.S. Bank analyst report, 82 percent of businesses fail due to money issues.
Remember, cash flow doesn’t always equate to money coming in and out. Timing should also be taken account. If your business is based on having an invoice system, your invoices won’t be paid until after the loan payments are due. Having a cash flow problem might well be the end of this.
The good news is that there are alternatives to debt recovery, so don’t think of scenarios like filing for bankruptcy yet. Bankruptcy could save a small business from closing, but it should be considered only as a last resort when everything that you’ve tried has failed.
This is due to the plenty of unfortunate consequences that come up. To avoid accumulating debts and becoming bankrupt, below are some bottom line tips that can help you stay afloat.
1. Don’t Ditch Your Initial Business Plan
Don’t let go of that initial business plan you wrote years ago. Take a good look at it, because it might be the reason why you got the funding in the first place. That plan had your goals and visions of your company at the core. And if you haven’t seen it in a while, do so immediately. Always have an updated business plan. And commit yourself to achieving everything in it.
A business plan is vital to the success your business. A strong, detailed plan involves sales and marketing, a capital-expense budget, operations plan, and the projection of profits.
If things change, like netting less profit for example, make sure that your business plan encompasses the current state of your business. With this, you can do proper forecasting of finances and possibly decrease, or even get rid of debt, thus avoiding bankruptcy.
2. Change Things Up
If your business is struggling then you might need to hire new people and come up with new ideas so your company can evolve. For a turnaround to be become successful, a change in management may even be needed.
Always have the willingness to admit that the usual business practices don’t work, and can’t continue. Honest and tough decisions may be needed, especially if you have business loans hanging over your head. Just make sure that you have the right people in place for your chances of change are higher.
3. Have An Asset Yard Sale
If your company has machines that haven’t been used in years, or a warehouse that doesn’t have as much inventory anymore, think about selling off those assets. It does depend on the size of your business, but you may have assets that you no longer use.
Do a detailed review of all your assets and sell anything that’s no longer in use. These assets could be old equipment or vehicle fleets that you don’t run anymore. Selling them would not only get cash moving in the right direction, but you’ll also have more space.
4. Negotiate The Debts You Have
Always think about debt settlement and consolidation, since it can help you avoid getting yourself and your business scrutinized. Try to negotiate with creditors for payment terms that work best for your business.
That very well could be a better option when compared to bankruptcy. Creditors will receive payments directly from you, despite the slower rate, and also allow you to keep your business and personal assets.
5. Bring In A Financial Professional
If you’re the only member of the management team, then true change can be challenging to achieve. Try hiring a consultant who is specialized in helping falling businesses get back on their feet.
You can begin with companies that have certified experts in these situations. Having an outside expert that has a fresh perspective can help you solve the problems of a business without having owners hire a new management team.
6. Take Action And Be Transparent
If you think that the future seems to have suddenly become difficult, look at the issues involved immediately. Be honest with your team and put plans in place to manage things differently.
Your plan should focus on increasing cash flow, adjusting profit expectations, or entirely restructuring your business plan. If the future looks tough, try to contact debt experts who can give you essential advice around the best course of action for your business. This could involve Chapter 7 Bankruptcy.
However, this is not always as scary as it seems. According to The Law Offices of David M. Offen in Philadelphia, “If you meet the qualifications for Chapter 7 bankruptcy, you will usually be able to keep nearly all – if not all of – your property through various exemptions, such as homestead or personal property exemptions.”
When problems pop up for you and your business, don’t ignore the problems at hand. The reality is that when you ignore business problems, the outcome may not be desirable, and often worse than it seems now. Things can actually get worse. Have you overcome similar business issues? Let us know how you overcame them.