It takes a lot of courage and motivation to start a business. Unfazed by the prospect of uncertain paychecks and a tenuous career path, entrepreneurs soldier on despite disappointing results. Business owners are sometimes blinded by their dreams, choosing to pursue a losing proposition even when common sense dictates that the business is dead in the water.
It takes even greater courage to accept the failure of a business idea and seek to move on to other options. For the most driven of these would-be tycoons, business bankruptcy is not the end of their dreams but merely the reset button that will give them the chance to start over.
Assess the Situation Honestly
Take stock of the company's financial position objectively. If creditors are not being paid and employee compensation and benefits are withheld for lack of funds, it is time to assess the long-term prospects of the business.
Chances for a Turnaround
Businesses exist to make money from their operations. A viable company will have clients from whom it can generate orders periodically, if not frequently. The company's operations fulfill a current need in the market. When business declines because the company's product or service has become obsolete, it is time to cease operations. For example, video rental stores have been replaced by fully automated, unmanned units in strategic locations.
Don't Throw Good Money after Bad
It is human nature to keep on trying to save a failing business. After all, perseverance is an inherent trait in successful entrepreneurs. For this reason, companies will often double down on their investments even when the business is in obvious decline with little or no hope of recovery, such as in the video rental business.
It is prudent to staunch losses by winding down the business and ceasing operations. Any value that can be salvaged from the business should be handled judiciously so that creditors and investors can be compensated in some way. Employees should also be paid what is due to them.
Cover all the bases with bankruptcy attorneys. Exiting from a business is a complicated process, more so when assets are not enough to cover liabilities. Investors, creditors and employees will line up for their share of the spoils. It is best to hire experienced bankruptcy attorneys for guidance.
Typically, law offices that specialize in business bankruptcies will have the capability to handle the entire process from financial assessment to finalizing the bankruptcy. Having an objective third party handle these procedures will allow business owners to refocus their energies and remaining resources to their next venture.