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Are You Shutting Down Your Business? Read This First.

Posted by on January 14, 2020 in Stuff with 0 Comments

Not everything you do can always go exactly how you planned for it. There might be a good strategy to start off with but somewhere along the way, the execution might have failed. More often than not, entrepreneurship doesn’t succeed as the idea itself might be innovative but it is not adding any utility to the customer, hence unable to gain funding after launch. This is a major reason why many businesses, especially small businesses fail in the long-run.

There might be short-term gains or achievements but errors and lack of funding can transform a constructive venture into a loss-making sick unit. With 6.8 lakhs companies shutting down in India, there is a high possibility that you might also be trapped.

If you actually want to know where your business stands and if it is failing, look for the following parameters:

1) Fall in the customer base and lack of growth in revenue: If the business cannot sustain customers, it will see a fall in sales and profits.

2) Rising costs along with rising revenues, leading to a reduction in profits: Rising revenues is a plus but if the costs weigh out the benefits, it isn’t fun anymore.

3) The structure of the return on investment to the company debt: This ratio shows the financial health of the company to understand how much borrowing is leading to how much return.

4) A high employee turnover rate: This also leads to added costs of recruitment and time wastage behind continuously training new employees.

5) No investor funding or capital availability in recent times: This portrays a possible fall in the market reputation of the company.

6) Lack of enthusiasm to be in trend and change with changing times: If the management is low on passion and the company hasn’t evolved, there is a problem.

7) The high rate of bills to pay off without revenue guarantee: Debt payments keep piling up but there is no claimed collection procedure to realize them. Debts in collection is one of the major reasons of businesses getting shut down. Sometimes without any assistance from a professional debt collector things go worse and end up closing the business entirely or the owner has to face the misfortune of bankruptcy.

Check how debt collection companies can help you get out of debt here.

However, many of these problems can be solved by looking for a new funding option, add a monetary boost or find some cash to try out new gameplay. With cash shortage being the second cause for business failure at 29 percent, you can consider the following funding options to kickstart your dream again:

1) Business Loan

You can contact a bank within your network that will provide you a lump-sum or line of credit for long-term use. Go for low-interest rates and something within the ambit of the risk you are willing to take. Moreover, don’t mix this up with your personal finances and only borrow as much as you will need.

2) Bootstrapping

If you cannot find a bank that is willing to lend or don’t want the risk of a business loan on your head, you could go for a self-funded cash infusion. Here, an owner has to use personal savings or retained earnings of the company as a substitute for the loan. Moreover, selling off assets or semi-finished goods can also work in case of a high amount. This way you can dodge interest payments on a bank loan and do not have any added liability.

3) Investors

Many businesses still receive investor options or can find opportunities to make a pitch. Here, you have experienced professionals pumping money in your enterprise, bringing in their support and knowledge in return for equity. To save your entire business, a little equity is an easy trade-off.

4) Personal funding

Another easy way out would be to find a fund provider amongst friends or family. In this case, they can loan you the money with a possibly lower than the market interest rate and better repayment timeline. Infact, an option to share some profits with family wouldn’t hurt anyone.

Even after all this, if push comes to shove, it might be the time to end your business. The signs might be too obvious, pumping in money might not help or maybe, you don’t see the business working out and thus the ultimate decision comes knocking on the door. So now, how to go about closing your business?

1) Do calculations and list down all asset and liability valuations of your business

2) Look if you can sell the business at a value or simply close it down

3) For selling, use valuations and find a profitable deal

4) Get all your tax and legal requirements finalized

5) Consider the career impact on employees and try to keep some monetary support for them for a couple of months.

This way, you can avoid any barriers or loopholes in shutting down your business or selling it off. Remember, documentation and permissions are very important.

All said and done, just don’t ever give up on your business easily, fight for it, put in your life into it and if it still doesn’t work, only then realize that it wasn’t meant to be.

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