Smart ways to keep your small business from going bankrupt
Is your business struggling to stay afloat? If you answer yes, you are not alone. According to Opportunity Insights, a Harvard-based nonprofit research group, the number of small businesses opened declined by 29% between January 2020 and December 9, 2020. 1
While this figure may seem depressing, it should be noted that more than two-thirds of small businesses opened in early 2020 and remained operational 11 months later. Some may have had financial difficulties comparable to yours but were able to overcome them. If your business is struggling financially and you want to avoid closure, the following steps can help you stay afloat.
Establish a payment schedule for your debts
While all debts must be paid, some obligations are more critical than others. Set up a payment schedule for your bills so you know which ones to pay first. Taxes, which include income, wages, and property taxes, are one of the most important obligations for small businesses. Tax money is the property of the government, not yours, and, as such, it should be your first concern. Payroll is your second priority, and any bill that is 60 days or more past due is your third.
Once these obligations are paid, you must pay the following bills in order: operating expenses (such as rent and utilities), vendors and suppliers, secured debts, insurance, and credit cards.
Offer underutilized assets for sale
Take stock of things or assets that you haven’t used in a year. For example, you can use vacant storage facilities, inactive company vehicles, and even outdated fax machines to generate more revenue and space. Large businesses may want to consider employing a broker who can help them maximize the return on their products for sale. Disposing of obsolete or unused assets allows you to stay up to date with new technology while increasing the value of your business.
Acquire a personal loan
If your business is on the verge of failure and you are doing all you can to preserve it, the first thing you are likely to consider is “saving time.” Obtaining a personal loan gives you more time to restructure and preserve your business. A personal loan can help you avoid bankruptcy and get back on your feet. There are many personal loan companies, such as Small Loans United Kingdom, which can offer you an abundance of choices.
Hire a specialist with extensive expertise in the field in which your business operates
It may seem counterintuitive to business owners whose businesses are already struggling to stay afloat, but expert assistance is well worth the investment. This can take the form of an accountant, debt consolidation specialist, or lawyer, depending on the nature of the business and its circumstances. Consult a professional to better understand their choices and the resources available to help them avoid bankruptcy.
Contracts should be renegotiated
By keeping an open line of communication with creditors, you can renegotiate more lenient repayment terms. By being upfront with a lender about your impending bankruptcy, you may be able to negotiate a more manageable payment plan. While it can be time consuming, asking questions about formal contracts can help protect the future of your business.
Eliminate unnecessary expenses
Just as we pay for unused subscriptions or memberships in our personal lives, we incur equally unnecessary expenses in business. Almost all businesses allocate funds to locations that do not add value to the business. Take the time to carefully review your monthly budget and eliminate unnecessary expenses such as expensive conferences or unnecessary staff.
Review your insurance policies
Insurance is a significant cost for most businesses. Health, disability, and property and liability insurance premiums often increase year over year, reducing cash flow from more profitable uses. Consult your insurance representative. Consider the different alternatives. For example, by choosing a policy with a higher deductible, you can frequently significantly reduce your monthly costs.
Plus, there are plenty of life insurance alternatives to consider. While term insurance is cheaper, a whole life insurance policy allows you to borrow against its cash value. Again, speak with your agent to determine your needs and the most effective method of meeting them given your current stage of life.
Create a retirement plan
As with business strategy, you need to have a documented retirement plan. Consider who will succeed you. For example, if you have more than one child involved in a business, who is best prepared to do the job? Either way, have you given any thought to how you would handle the virtual certainty of conflict and hurt emotions that will arise from your decision? Consider the source of funding for your succession strategy. There are many methods to implement a succession plan, including borrowing, transferring ownership, or establishing a payment system. Whatever you decide, contact the experts to handle any legal, tax, or other issues that may arise as a result of your last course of action.
Finally some thoughts
While declaring bankruptcy isn’t the end of the world, it’s still safe to protect your business from financial disaster. You can save a lot of money by cutting out unnecessary expenses and selling non-essential things. Prioritizing payments and, if possible, renegotiating your debt will also help you regain control of your debt. Remember, when times are tough, roll up your sleeves and fight for the future of your business.