Business owners know that it takes every ounce of sweat and blood they have to make their business successful. However, once the enterprise is on solid ground, it can be a thrill to know that it was all worth it. Businesses tend to go through ups and downs that can shake the confidence of any entrepreneur. It’s important to know when the business is experiencing a small crisis and when it’s time to cash in and walk away.
The Odds Aren’t Good
It’s a well-known fact that 50 percent of businesses fail in the first year. As if that statistic weren’t bad enough, Bloomberg estimates 80 percent will fail in a year and a half. Businesses face enormous challenges whether the economy is doing well or not. Most businesses that end up failing will fail not because they weren’t a good idea, but because they run out of money. To keep money flowing, good businesses will focus on maintaining the following:
Financials – The fastest way to take the pulse of your business is to know how much money is coming in and how much is going out. Keep accurate financial records and review them monthly, quarterly, and annually. They will be the first indicator that something may not be going as planned. You should have money set aside to weather temporary emergencies and know when your reserves are getting low.
Good Leadership – Problems in the business operation can be handled by capable supervisors. They can assess problems with customer services or product delivery. Surround yourself with experts in marketing, finance, insurance, and management to make sure that you give your business the best chance to succeed.
A Solid Business Model – You should be setting business goals and always seeking out new opportunities. If the market is not responding to your offering the way you had hoped, it might be because the business model needs to be tweaked. Included in your business plan should be an exit strategy.
When Things Still Don’t Work Out
If you are following the health of the business, you will know when things aren’t working out. Some potential exit strategies include:
Closing the Doors – If you can settle the debts, but still want to get out, you can make plans to simply lay off your staff and close the doors. This is the best way to get out of a business, but it requires that you do so long before you are in a position where you don’t have the money to pay off creditors.
Selling Out – Maybe you might not be able to make the company as profitable as you would like, but someone else may think they do have what it takes to do so. You can sell your business, even when it’s not a grand success, and move on to something better.
Declaring Bankruptcy – You will need to seek help for declaring bankruptcy once you’ve run out of money and your creditors are knocking down your door. If no one has an interest in buying, you may have no other choice than to declare bankruptcy.
Wagner, E. (2013) 8 Out Of 10 Businesses Fail. Retrieved from http://www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/