Small businesses are the bread and butter of America's economy. There are nearly 30 million small businesses in the U.S., and they make up a huge market share of the country's employers. That being said, though, the fact remains that (according to data provided by the Small Business Administration) about one-third of smaller companies don't make it past their first decade.
With such a high failure rate, it is vitally important for business owners not only to have a detailed plan to get a business off the ground, but also an exit strategy for how to abandon a sinking small business ship (be it through selling the business, dissolving it or another method).
At the first sign of financial danger, entrepreneurs need to focus on the positives, avoiding the temptation to panic and take drastic action like selling off shares in the company unnecessarily. Oftentimes a firm hand of leadership or a confident demeanor to potential clients/customers can be the jolt needed to turn things around. Not panicking can also help employees secure enough to keep giving 100 percent to their duties.
If staying the course doesn't about positive economic change for the business, then it might be time to consider making supply, location or staffing cuts. For example, moving from a larger location to a smaller one will likely save money that can either be reinvested into the business or set aside to pay creditors should the business collapse. Desperate financial times call for desperate financial measures, so as painful as it may be, it might also make sense to lay off or fire employees.
Should no other measures prove beneficial, it could be the right time to dissolve the business and set off on a new course. This could mean starting another business, seeking outside employment or changing focus to a new career field. Regardless of where the future heads, though, it is important to learn from past lessons and mistakes to avoid falling into the same traps the second time around.
Source: Huffington Post, How to Take Control of a Failing Business, Deborah Sweeney, June 28, 2013© 2014 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.