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.
Table of Contents
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? and learn how to manage your money?
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 income
- Keep 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.
About Carson Derrow
