No one goes into business with the goal of failure. Yet, it happens to an unfortunately large amount of companies. Sometimes you wind up having traveled too far down the wrong road. It may have been a significant problem like incompetent management or a mistake in your strategy. Too many unnoticed minor errors can also land the business in trouble. Regardless, the only choice, in the end, is to sink or swim.
If you are not quite ready for bankruptcy, you still have a few options.
Be Honest with Yourself
To be honest with yourself about money is one of the most challenging areas. It is easy to make up excuses. Your liquidity might be poor, but look at all your assets! Leave these thoughts behind. A financial crisis is not the time to make excuses about your situation. It is not time to blame the economy or how competitors are driving down prices. Your business may be a reflection of the economy. But, your financial success also depends on your leadership and ability, to be honest about your finances.
The more honest you are about your financial health, the more options you will have when you try to remedy it.
Act Now, But Act Smart
Identify the source of the most pressing issue sending your company into financial disarray. Then, tackle it. Do not dance around it. Treat it like you would a sliver in your foot, and remove it before it does any more damage. This step is hard for many business owners because it may mean making difficult decisions. Yet, in many cases, these decisions should have been made long ago. Now that your business is in a financial crisis, there is no space for sentiment unless sentiment happens to pay the bills.
Be confident that the decision you are making is wise. Do not cut off an essential vendor or skimp on the quality of your product. Look for those decisions that are a boon to your company but will not directly impact how you serve your customers.
Try Renegotiation Before the Axe
Once you have identified your critical areas of need and you made those difficult decisions, look towards other problem areas.
Instead of axing anything costing you too much money, try renegotiating your contracts or plans. This process typically occurs during a Chapter 7 filing for bankruptcy, but you need to preempt this situation. Saving money on essential functions can help you climb out of your financial pit. It will also put you in a better position if treading water results in the opportunity to move forward with your business.
Change Your Business Model
Changing your business model is not the first last-ditch attempt to use; however, it is a helpful plan. Take a hard look at your current business model. Look for potential updates and improvements to help you get back on your feet, and prevent financial disasters in the future.
Look at your target market and understand how it changes and evolves. How can you better reach your customers now and shortly? Are you getting the right customers? Can you adapt your product to better suit your customers’ needs and solve their problems? These questions could help you restructure your business model to function better now and in the future.
Financial distress does not need to be the end of the road, and bankruptcy should be considered only if there is nothing else to be done. Remember to be honest about your finances and what got you there. Even if you go under, you will have learned valuable lessons for next time.
