When things start to get tough, most small business owners tend to do one of two things—either they double down on what they’ve already been doing (which probably won’t help, as it’s gotten them where they are), or they become paralyzed, uncertain what to do. Here’s a checklist of steps you can take to help you move in the right direction, or perhaps decide that bankruptcy or dissolution of the business is your best move.
Step #1—Get a Good Handle on Where You Are Spending Your Money
As a general rule, businesses struggle for one or both of the following reasons—expenses are too high and revenue is too low. Before you do anything, you need to determine what you spending. The best way to do that is to have an experienced accountant, bookkeeper or financial professional review your books. Once you have a full understanding of all your expenses, you need to identify which ones are mandatory—taxes, inventory, salaries— which are important (eg. Marketing, financial management) and which are can be adjusted or deferred to help save the business—owner or employee perks, for example.
Step #2—Pay Closer Attention to Accounts Receivables
It’s not uncommon for a struggling business to have a substantial amount of revenue that simply hasn’t been collected. It’s not something that most business owners do well—they know their business, but they hate collecting money. If you can’t do that, though, you won’t stay in business…period.
Step #3—Avoid Business Deals that Lose Money
This may seem obvious, but a surprising number of owners of troubled businesses will underbid contracts or offer deep discounts to try to get cash flow. That’s never an effective solution—you’ll only dig the hole deeper.
Step #4—Get objective third party advice, then develop Plans and Contingencies.
At some point, you are going to want to run things by someone with the knowledge and skills you need to turn around a business, who is disinterested, such as an accountant with turnaround experience and a bankruptcy or turnaround attorney. Even after a close look, you may still not know how things are going to turn out. Also, as we have detailed in other blog posts, there are a lot of pitfalls and traps when a business is in trouble. For that reason, we recommend developing alternative plans, such as one for turnaround, one for orderly wind-down of the business, and one for a shut down. We can and do help our clients with all aspects of the process.
Contact Neuner & Ventura, LLP
At Neuner & Ventura, LLP, weprovide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
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