By Vanessa B
Almost every highly successful entrepreneur has one or more failed business ventures behind his or her back. All the same, when you’ve thrown yourself, heart and soul, into starting and running a business, it can be hard to know when to concede defeat. It’s best not to wait for your creditors to make the call first.
Your company may fall into liquidation by order of a court, and being realistic about when to call it quits is by far less stressful. Knowing when to make a decision to close, and having a few coping tips at your fingertips, will help you to navigate the process of winding up your business and closing its doors. The bright side? You’ll be out of a money trap and able to start afresh.
Know When The Writing’s on the Wall
Photo: Emil Kalibradov
When you’re at the coalface, struggling through from month to month, it can be hard to recognize the time when you should close your doors. But when you start struggling to pay your creditors, you need to do some impartial thinking. Is there a chance that you can take active steps to turn your business around? Is there enough time and do you have enough funds to finance the attempt? If you aren’t sure of the answers to either of these questions or if you’re simply tired of struggling, it’s time to start winding things up.
Having made the decision to close your doors, it will take a little time to get things in order. Your first step is to inform any shareholders or business partners about your decision. The future of your business also matters to your staff, and as the primary decision-maker, it’s simply good manners to be the one to inform them that the business’s days are numbered. Since collecting any outstanding debts becomes more difficult when debtors know you’re in the process of closing, do ask them to maintain confidentiality.
Collect Outstanding Accounts and Inform Clients
Closing a business has its costs. You will need to settle your accounts through the collection of debts and the sale of assets, and you’ll probably need some form of professional help to guide you through the process of shutting up shop. Redouble your efforts to collect outstanding payments – offer settlement discounts if that’s what it takes. Don’t tell debtors that you’re closing, at least, not just yet. They may be tempted to defer payment indefinitely.
Once you’ve done what you can to collect outstanding payments, it’s good manners to tell any clients who depend on your business that they will have to seek another supplier soon. If you are in the middle of delivering on a contract, there may be penalties. Once again, professional help will enable you to sort out your financials and prioritize payments to your creditors.
Fulfil Your Legal Obligations
You will have legal obligations to your staff, you need to ensure tax compliance, pay your creditors (as far as possible) and get your business struck off the Companies Register unless it was a sole proprietorship or simple partnership.
While you may be averse to incurring any further costs at this point, it’s advisable to work with an accountant or lawyer to help you to navigate the procedures and processes you’ll have to follow. By doing so, you can avoid costly mistakes and compliance issues that come back to haunt you after the fact.
Make a Fresh Start
While everything we’ve discussed so far looks like doom and gloom, there’s light at the end of the tunnel. With the burden of a failing business off your shoulders, you can get on with your life, recover your financial health, and make a fresh start. It doesn’t happen overnight, but it begins with your decision to cut your losses, and strange though it may seem to someone facing this decision, it’s a positive move in the right direction.