A common mistake we often saw owners of troubled businesses make was a lack of “worst-case, best-case planning”. All they did was keep on going hoping the problems will go away. The result was a recipe for failure as they reacted, often too late, to crises. Today, most businesses are in some form of crisis. Here are some thoughts to keep in mind:
- Congress has made it a lot easier to save a small business in Chapter 11, but the process is not without substantial expense and risk. So first of all, start planning now with a possible bankruptcy in mind. Create a fund of as much money as possible to fund a turnaround, including money for accountants and lawyers.
- Give yourself time to grieve. Having a sick or dying business is often just as hard to handle as having a sick or dying family member. But resolve to move forward and make the best of a bad situation.
- Spend the down time cleaning up and organizing your finances and records. Get tax returns prepared and filed. Post and update all bills then get them out. Review all expenses and identify those that can be reduced or eliminated.
- Identify the vendors, customers, creditors and relationships that are key to your business getting back on its feet. And those that are not. Review all loan documents and invoices. Reach out to those you want to work with you, to talk frankly about your respective situations and what you can do together to minimize the pain of this situation. Be as honest as you can with them.
- Create a plan for what you will be able to do and how you will do it to start back up.
- At the same time, look at past mistakes and how to avoid them going forward.
- But, be honest with yourself: figure out whether you can reopen, and if so, what it will need. If you cannot justify the expense or a viable reopening plan is out of reach, now is the time to recognize that.
- Finally, consult with an attorney and an accountant with experience in turnarounds.
This is not the first time we have had financial crisis, nor will it be the last. We have all gotten through them in the past and “this too shall pass…”