A Small Business’ Guide to Navigating Bankruptcy
Bankruptcy happens.
Yes, when you first opened your small business, every minute of planning was dedicated to surviving and thriving. You had growth estimates, not “slowth” estimates. Bankruptcy was the last thing on your mind.
But the business world is cruel and unforgiving. Not only can it take down subpar and average ideas, but broader economic downturns can turn even some of the best-planned enterprises into duds if the timing is right.
So if you do find yourself in the throes of bankruptcy, or even if you’re just facing financial hardship, don’t play the blame game – even with yourself. Play the long game instead, and stare bankruptcy right in the face.
Because your small business might just survive it.
5 Tips for Navigating Small Business Bankruptcy
- Admit it. The first step is acceptance. Many small businesses post losses here and there, but if you find that you’ve been bleeding substantially for a prolonged period of time, there’s a problem. Maybe you can fix it, maybe you can’t – but you’ll never know unless you face the facts first and admit there’s an issue.
- Start cutting. Many small business owners have a hard time reconciling the idea that anything can be cut. After all, most emerging businesses are working with shoestring budgets to begin with. But an impartial second look at your budget might help you reduce losses and stay solvent long enough to fix the broader problem.
- Know your bankruptcies. Businesses actually can file for different types of bankruptcy. For instance, if you’re a corporation and you want to fight to stay alive by negotiating new terms with your creditors, Chapter 11 bankruptcy can allow you the chance to reorganize (though you can also negotiate out of court). Then there’s Chapter 7 bankruptcy, which typically is used by individuals. On the one hand, you’ll often have most of your debt forgiven, but you’ll likely also have to liquidate assets to make creditors whole.
- Sell out. If your small business is losing money, that doesn’t mean your company is worthless. In fact, in the right situation, it could be a valuable asset. Consider positioning your company for a sale before you go the bankruptcy route.
- Talk to a professional. Before you decide on whether to file for bankruptcy, get in contact with an expert who can show you the advantages and disadvantages across all your options. And if you do go the route of bankruptcy, you’ll also want professional assistance to guide you through the process. After all, you don’t want legal problems on top of your current troubles.
McManamon & Co., LLC offers a number of services for small businesses considering or going through bankruptcy or a financial hardship, including solvency analyses, tax planning and forensic accounting.
If the chips are down, call us at 440.892.8900 or contact us online. We can provide you with the help you need when you need it most.
Tags: bankruptcy, McManamon & Co., navigating bankruptcy, small business | Posted in accounting, bankruptcy, McManamon & Co.