If your business is currently in a precarious financial position, you may be faced with some tough decisions ahead. It is unfortunate yet inevitable that during economic downturns small and medium-sized companies will struggle.
You should not give up hope, however.
If you adopt a positive and active approach, you may find that your business is salvageable. At the very least, you will mitigate any risks to yourself. Here are a few tips for when your company is at risk of going under.
Evaluate Your Financial Position
It will be difficult for you to judge what you should to with your company without getting a clear picture of its finances. You should consider hiring an accountant or auditor to get the most accurate idea. Their verdict can subsequently be the basis for any further actions you take in regard to your business. You may find that by cutting costs and focusing on your main sources of revenue will allow your company to continue operating.
Alternately, it may be the case that you will need to minimise your losses while you attempt to unburden your assets.
Minimise Your Expenses
By far the #1 reason small businesses close is due to cashflow, with it accounting for up to 82% of small business failures. It is therefore crucial yours is efficiently managed so any earnings you do make are maximised. This is doubly true in times of economic hardship, as profit margins narrow.
There are a multitude of ways you can reduce your expenditure. Ensure your company is using energy and other resources efficiently, to begin with. Make any necessary reductions in staff and office space that will keep your company at least breaking even. Also, check that your tax sheet is as optimised as possible.
There are plenty of options for increasing your operational efficiency, so try getting creative.
It is undeniably difficult when your business is on the brink of failure. Even if you are finding that your company’s position is ultimately unsalvageable though, you should still be proactive in working to find the best solution. If your cashflow problems are leading to rapidly increasing debts, you should look to offload at least part of these quickly, if you can’t turn this around.
In the worst circumstances, you may also find that your company is at risk of insolvency due to debt issues. In these scenarios, it is better to liquidate your assets sooner rather than later. This is because you will likely get more favourable terms by doing so. Read the Insolvency Experts – Company Liquidation Process Explained guide to get an idea of your options.
As attached as we can become to our own businesses, there is no advantage in acting contrary to the facts. You should be pragmatic in your approach to reducing your costs and evaluating your options. There is no point in hanging onto employees when doing so will bankrupt the company, for example.
If you manage your business’s finances with pragmatism and foresight, you may be able to protect yourself from any serious damage to your personal finances, even if you do have to sell or dissolve your enterprise in the long-term.