Surviving the first few critical years in business is possible. With hard work, determination, and the will to make it through, companies, even the small-scale ones, can sail smoothly through these transition years.
It is not unusual for new businesses to fail during their first few years into their venture. According to studies, an estimated 21.5% of small businesses close down after the first year of their operation. Business closure could be for a lot of reasons. Perhaps the primary reason why companies fail is due to poor or inadequate business planning – or lack thereof. Bad business planning produces a snowball effect that affects all areas of a business structure, including operation, management, production, and finance.
Suppose bad business planning starts to take effect on the financial side. In that case, what could likely happen are missed or incorrect bills and taxes payments, poor debt or loan management, insufficient cash flow, affected marketing and sales strategies, no emergency funds, etc. And if financial mismanagement starts to get out of control, creditors come knocking at the door in every instance. With no means to pay off, the effect is that the business derails off track and loses its momentum, leading to insolvency and even closure.
If the owner wanted to keep the business open, the only saving grace at this point would be to file for bankruptcy.
Filing for bankruptcy can help businesses make it past those financially stifling and struggling years and come out thriving and eventually flourishing. For bankruptcy debt relief in San Diego, the Law Offices of Ronald E. Stadtmueller is the right partner that provides the solution financially-stricken businesses are looking for to get them back on track. The law firm specializes in Chapter 7 and 13 bankruptcy services, including debt reorganization, debt discharge, and other general bankruptcy services.
Chapter 11 bankruptcy can help keep businesses open and in operation while restructuring their finances and continuing to make payments to creditors through a court-ordered repayment plan. Once the bankruptcy process begins, Chapter 11 gives that breathing room for businesses, halting collection actions and giving business owners enough time to reorganize their finances.
But wouldn’t it be better to stop business failures from happening?
Averting Business Failure
It takes more than just having a good product and marketing concept that can make a business grow and successfully thrive.
How an individual starts a business can determine its success or failure. That’s why business owners should ensure they have a clear roadmap of what they want to achieve, a mission and vision, and strategies to attain their goals.
Take a look below at some of the tips to prevent business failure.
Prepare a Good Business Plan
It might seem tedious, but business plans are essential to any business, whether large-scale or small-scale. Business plans are blueprints for how a business should be run and maintained.
This planning document typically includes a summary of the company’s background, marketing analysis, marketing and sales strategies, contingency planning, and financial planning. These facets should complement each other to make the overall business plan work. The marketing and sales strategies could not successfully work without a good marketing analysis and financial planning. Financial planning could not work without the proper marketing and sales strategies. Even contingency planning would not be effective without a sound financial plan.
Business goals should be SMART. SMART means Specific, Measurable, Achievable, Relevant, and Time-bound. This is to ensure that goals and strategies are realistic, can be easily monitored and tracked, and can put focus and clarity in goal-setting to not waste time and resources.
Cash Flow Management
One of the essential aspects of running a business is cash flow management. Note that a substantial sales revenue would amount to nothing if the profits are not handled well. The idea of cash flow management is to ensure that incoming revenue should be more than the outgoing expenses. The process consists of tracking profit and costs, monitoring income revenue and expenditures, and monitoring debt payments and future payments, such as operating and capital expenditures.
Having excellent cash flow management can ward off any risk of insolvency.
Avoid Using Business Funds for Personal Use
Another cause for a business downfall is using business funds for personal use. This is a big NO. Business owners should always separate business funds from their private funds. Aside from causing accounting confusion, there’s also the possibility of not being able to track tax-deductible expenses or causing a miscalculation in taxes.
Do Not Be Lured Into Fast Growth
New business owners can get easily tempted by the fastest way to grow their business’s profit. In this case, the sentiment “patience is a virtue” comes into play. Success doesn’t happen overnight. Especially for new companies, it is expected that they’ll encounter many challenges and obstacles along the way. Always think long-term because long-term planning will make a business sustainable and has a higher chance of longevity and success.
Having the right partner in times of financial distress can help give people respite and regain back control of not only their finances but also their peace of mind. Business owners can avoid failure and closure with proper planning, support, and partners. For those who want to regain financial footing and make a fresh start, contact the Law Offices of Ronald E. Stadtmueller because financial freedom is very much possible.