Page 31 - How To Avoid Going Bust In Business

One of the hardest things in a business is to let it go. It’s like killing a baby. This is
something you planned for, invested all your money in, worked your guts out for. It
can be like a death in the family deciding that you need to turn off life support on it.

I once spent seven years of part time work – nights and weekends – working on a
business idea. I finally launched it on the internet. Over the next four months it
earned me $30. Like any good field commander I pulled back and regrouped, but
looking at it with a baleful stare I knew that it would at best be a marginal earner. An
economist would at this point lecture me on opportunity costs. What could I do with
the time, the talent and the money that would earn a greater return? Best to
euthanize it now before I invested more of myself in it.

Yeah, yeah, I know all about going the extra yard. You know - the story of a gold
miner who worked for years driving a shaft into a gold prospect before finally giving
up. Another miner took over the claim, drove the shaft another yard and hit the
mother lode.

It’s the dream that keeps miners going long after they know they should quit. It can
also be the dream that takes businesspeople beyond the point of no return when
things are going badly.

Do some medium to long term profit projections. Be honest this time – not the
dreamtime budgets you drew up before you started out.

If it doesn’t look salvable, sit down with your accountant and lawyer or a liquidator
and work out an exit strategy.

Exactly what that will be depends very much on your personal situation and the
business structure. It also involves things such as whether you have given personal
guarantees on business loans.

It may be possible, if you have taken action before the whole edifice crashed and
burned, that you can cash up the assets, pay all the creditors and come out poorer,
wiser, but still more or less in one piece financially.

I have to say that that outcome is rare. Most small business people keep on going
long after there is no hope of a happy ending.

Next option: You’ve cashed up and paid out but there is still a shortfall. If it’s a
relatively containable amount, and you value your commercial reputation you might
decide to pay it off from future earnings.

Perhaps the creditors will agree to settle for a lesser amount.

It depends on a myriad of factors, but most creditors will accept this as an alternative
to a messy insolvency which will mean they get little or nothing.

As I said previously, life will go on. You’ll need a job. You might want to start again
in business later.