4 Great Tips for Entrepreneurs to Avoid Bankruptcy
Starting your own business can be seriously tough.
What people tend to forget, however, is
keeping you business afloat can prove even tougher.
With 70% of small businesses failing to reach the decade mark, the prospect of failure is a realistic threat entrepreneurs need to know how to face.
When things turn sour, many business owners
will be quick to reach for the bankruptcy button without a working knowledge of
the full range of options available to them.
So whether you’re an entrepreneur preparing
for darker days or a small business owner fighting to survive, so long as your
business is alive and kicking, you have options available.
Here are some of the best tips for entrepreneurs to avoid bankruptcy, provided by debt management specialists.
Negotiate
with your creditors – be up-front
Early communication is key. There’s no
point in shying away from the fact that you’re in financial trouble.
Talk to your creditors as early in the
process as possible to let them know there is an issue.
The likelihood is, most of them would
rather you remain in business in order to repay them in full rather than
declare bankruptcy – which may necessitate legal action from their side. This
means, often, they’ll be on your side.
Sit down with them and try to work out a
repayment plan.
If you have multiple debtors to address,
it’s helpful to be organised. Build out a spreadsheet of your debts so you can
clearly see which are the largest and most pressing.
Not only will this direct your negotiation
schedule, but it will help creditors feel assured that you are crystal clear on
your circumstances.
Run
a tight-ship – professionally and personally
There are numerous ways a new business can
save money on its operating costs. And almost all tips are easy,
environmentally friendly and immediately actionable:
If you’re feeling a little
chilly at in the office – why not put on an extra layer or two instead of
turning on the heating?Electricity is expensive, so
make sure gadgets are not left on standby for long periods.Printers, ink and paper costs can
become prohibitive if you’re printing regularly – become a paperless office so
far as is possible.
Likewise, be sure to shop around when
sourcing office supplies, or freelance services. Keep your bottom line as low
as possible.
Ultimately, a lot of money is wasted on
avoidable expenses. By simply being frugal you’ll find your pockets are a
little less empty.
Though why stop at your professional life?
If you’re battling to keep your business
afloat… it might also be time to simplify your lifestyle – albeit temporarily.
Instead of eating out, why not practice your skills in the kitchen?
If you drive, try to combine journeys. Fuel
is ever more expensive – why not do your grocery shop on the way home from the
office?
Are you still using that expensive juicer?
Is the PlayStation collecting dust? Selling unnecessary tech can be a quick
cash hit to tide you over until the next bill lands.
When facing bankruptcy, it’s time to
account for your expenditures and reflect on where you can save some cash.
Look
for additional revenue streams
Are there other income opportunities for
your business?
It doesn’t have to be service led. Do you
have a spare desk in your office? Why not rent it out to a freelancer to help
cover your office costs?
What’s more, if you have the ability to set
up and run a business, your skillset is likely to be attractive to other
business owners elsewhere.
Engage with your industry and other
entrepreneurs through platforms such as LinkedIn and Medium. By showing off
your business credentials and spark, you may find yourself headhunted for some
consultancy work.
Or simply get your profile up online on
freelance websites and take on extra opportunities within your specialisations.
While you may only have eyes for your
business – and debt issues – fresh challenges (with remuneration) could be the
perfect tonic.
Formal
bankruptcy routes – talk to an expert
You’ve spoken to the creditors – and shown
them your revised payment plan.
You’ve taken on extra work and are running
a tight-ship in terms of both business and personal finances.
Yet you still can’t meet your payments.
If this is the case, it’s time to consult a
professional.
When cash flow is insufficient and
creditors are owed unpayable debts, a Creditors Voluntary Liquidation may be
the best option. Likewise, an Individual Voluntary Arrangement or Summary
Instalment Order (depending on your location) may be recommended.
When you’re getting into the nitty gritty
of debt management, we’d always advocate working alongside an expert. There’s
too much at stake for both you – and your business.
Google is your friend. Look for an insolvency practitioner in your area to talk through your circumstances.
Our
best tips for entrepreneurs to avoid bankruptcy
By simply acknowledging your situation,
you’re taking the first step in avoiding bankruptcy. But it’s not enough.
Look for support.Be self-critical.Seek additional sources of
incomeKeep those who need to be
informed, informed.
It’s not an easy path… but by trying to
take on some of the strategies detailed above you can avoid bankruptcy and the
consequences that come with it.
That said, if bankruptcy is truly
unavoidable, speak to a professional. The impact it can have on you and your
business can be managed if dealt with early and properly.
Good luck with your business!
For more finance and money management advice check out the money section of our blog.
Author Bio: Hudson Weir are an insolvency practitioners firm from London helping entrepreneurs and small businesses with debts and financial complications.
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