The Covid-19 pandemic affected business owners in many different ways. For a few it was a boost to their business, while others saw their businesses go into a stall mode. Yet another group was forced to close because they could not survive without customers patronizing their businesses.
For a portion of the businesses that closed the pandemic was nothing more than the proverbial nail in the coffin, meaning they were barely hanging on and the pandemic put them under. But a large portion of businesses were doing just fine, and it was only because of a self-induced forced shut down by the government that they are no longer in business. They did nothing wrong. They just happened to be in the wrong place at the wrong time.
I can write about what to do if your business is losing money because I have been there more than once. I have had to shut down a business and let all of my employees go knowing they did nothing wrong and they were without a job to support their family, and I can tell you it sucks. It sucks a large portion of your life away when you worked on doing the right thing and you feel like a failure. However, it is even worse when you are losing money and you don’t know what to do.
Here is some advice on what to look out for and how to address the situation if your business is losing money.
First and foremost, be honest with yourself. Look back at the history of the business and see when it last made a profit. If it was more than 12 months ago, you probably have a losing business, and you should close it before outside issues force you to.
Is there debt against the business? If so, are you keeping the business open just to service the debt even though the business is not profitable? If so, go to talk to the holder of the debt and see if you can work something out, because the debt holder is your partner whether they want to admit it or not. And they would much rather help you be successful than deal with a closed business.
What is the situation with your vendors?
Do you owe them money, too? Vendors are one of the best sources of financing and helping a business to work through the rough times. Here again, by default, they are your partner, and they have a vested interest in you. I have done lots of vendor financing and it ended up being a win-win for both my business and the vendor.
Have competitors or technology passed the business by so that it can never be profitable due to the change in the marketplace? Like a video store would be to Netflix or a small hardware store would be to a Home Depot? The last thing you want to do is to be in denial, which most business owners are. They keep saying to themselves that things will work out and instead they just keep digging the hole deeper.
Are partners involved in the business? Maybe the business can’t support all of the partners and someone needs to buy out some of the partners for the business to be profitable. Many times too many mouths try to feed from the same business and the only solution is either some of the partners sell out to the other partners, or they close the business and then everybody loses.
The worst-case scenario is you operated the business too long and either you closed the business or you were forced to close and there is more outstanding debt than there are assets available to cover the debt. You are personally out of energy and out of money. If you find yourself in this situation you still have options. You can file bankruptcy for the business and sometimes the business is able to come out of bankruptcy and survive. Or you can file personal bankruptcy, which will allow you to put everything on hold until the bankruptcy court settles on your behalf with the creditors. All too often people are reluctant to use the systems that have been put in place for business owners so that if things go wrong they are able to pick themselves up and get back into the game.
Regardless of whether one is successful or not, if you are a business owner you need to be commended. Being a business owner is not easy. As a business owner, if you are not working at your place of business you are thinking about it. You are constantly concerned about your employees, their families, your vendors, and your customers. Whether you do good or bad you will always have my respect for being a business owner.
Terry Monroe is the president and founder of American Business Brokers & Advisors.