Starting a Business on Firm Financial Footing
Business bankruptcies can be much more traumatic than an individual consumer bankruptcy. For many business owners, more money is at play. They have more assets they can lose in a liquidation than the typical consumer. They might also have employees who are depending on them for their livelihood. When a business fails, many lives are affected.
An interesting article in Entrepreneur magazine contains several tips business owners should follow when they start their business. Starting early is key, because some business owners make critical mistakes that end up hamstringing the company years down the road when the economy turns south.
Borrowing too much not only increases your expenses—you have monthly debt payments, after all. But it could also create an incentive to overspend when you really don’t know what you should be investing in. Remember, a dollar spent today might be a dollar you can’t spend tomorrow when you really need it.
If you do have to borrow, lock down the key details—the interest rate, term, and number of installments. Definitely comparison shop for the best rates, though realize that many lenders are hesitant to lend to new businesses, so you might have to take a loan with a high interest rate or personally sign for the loan.
Don’t Borrow Too Little
This is another great tip. By borrowing too little, you might lack cash flow to pay off your bills as they come due. Unless you are running a sole proprietorship, the last thing you want to do is pay business debts with a personal check, which could raise doubt about whether your business is truly independent of you.
Entrepreneur magazine recommends that you do extensive research on how much it costs to really get a startup in your area up and running. Then draft a budget and try to stick to it.
Improve the Quality of Your Product or Services
The best way to bring in customers is to develop a reputation for quality. Don’t try to make up for average goods by blowing money on expensive marketing. Instead, focus on making your customers happy. Satisfied customers are the best way to grow your business, and be sure to address any weaknesses at the start of your business.
Get Legal Advice
This tip isn’t mentioned in the magazine article, but we feel a need to highlight it. Even small businesses have a myriad of legal issues that need to be addressed, everything from complying with tax issues to staying on the right side of employment law. It is better to get accurate legal advice upfront than to face a lawsuit down the road that could cause your business to collapse. Spend the money for a good business law attorney.
Considering Bankruptcy? Call Us
Most businesses fail, which is nothing to be ashamed of. However, you need to address financial pressures in an intentional way.
To talk about whether a Chapter 11 reorganization is appropriate, or whether you should liquidate, contact the Plantation family & small business bankruptcy attorneys at Nowack & Olson. We have helped many small and family businesses file for bankruptcy and can discuss your options. Call us today at 888-813-4737 to schedule a free consultation.