Are You a New Business Owner? Consider These 4 Points to Avoid Bankruptcy
Monday, August 20, 2018, 6:00 PM | Leave Comment
Starting your own business is an exciting opportunity, but it can also be nerve wracking.
While you may have come up with the perfect idea for a company, put together a watertight business proposal, and got all the funding you needed, it’s hard to know how well your idea will work in practice.
Fortunately, there are some tips you can follow to reduce your risk of bankruptcy. Here are four of the best.
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Consider More Fundraising
It can be hard to understand the financial burdens you’ll be dealing with until you’ve already started your company, and one unfortunate and unexpected surprise can quickly strip your bank account bare.
Remember that you don’t just need enough money for your business to stay solvent. If a problem arises, you need enough of a cushion that you can keep your business afloat while also having the resources available to identify and address the root cause of your underlying issues.
Taking a more aggressive approach to building capital and being sure to always set aside a nest egg is critical when trying to avoid bankruptcy.
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Identify the Red Flags
While persistent negative cash flow is the most obvious sign that your business may be going under, it’s not the only sign to look out for.
Companies like creditriskmonitor.com crowd source customer behaviors and other metrics to assess the potential risk of bankruptcy. These results serve a similar role for businesses as credit scores do for people. The result is a highly accurate bankruptcy risk assessment known as a PAYCE score.
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Don’t Be Afraid to Change Your Management
While frequent and sudden changes in managerial structure are often a sign that a business is struggling, they can also be a sign that the owner has identified the struggle and is looking to resolve it.
While a change in management personnel and protocol is something you should always consider carefully, it’s also an option you should always keep on the table.
If you start to see flagging sales or other indications of impending bankruptcy, perform a careful audit of your managerial structure. The safety of the same old routine isn’t worth risking your livelihood and that of your staff.
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Bring in a Consultant Sooner Rather Than Later
The most important way to reverse your course when you’re steering towards a bankruptcy is to identify the problem as early as possible. That said, finding experts who can help you put together a plan of action can also be important.
You don’t need to wait until you’ve exhausted all of your available options before bringing in a consultant. The sooner you get to the root of the problem, the more effectively you can resolve it.
Remember that avoiding bankruptcy is an issue of risk assessment. Small leaks in a boat can be resolved with little damage if they’re patched quickly, but once it starts taking on water, it becomes that much more likely to sink.
Remain vigilant, and don’t let yourself become blinded by your love for your company.
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