4 Things To Consider When You Close The Doors

By Daniel Steyskal, Trapezoid Business Services

You ran the metrics, figured out true COGs, trimmed excesses, used data driven marketing techniques, and dug deep to try and pull your business into profitability. It’s not working and the business hasn’t been profitable for five years.

I was working with a client in a similar situation, who did not want to accept that it was over and unfortunately dug a deeper hole with additional mortgages, lines of credit, and of pawning family treasures. These sacrifices only bought an additional year-and-a-half after not turning profit a single month in seven years. Just because a specific location closes does not mean one’s entrepreneurial dreams are over, especially if a business owner does the following:

1. Examine total liabilities and discuss options with a bankruptcy attorney. This is a step you cannot skip. Do not listen to the internet, do not listen to your friends, do not listen to your partner, and do not listen to your most trusted advisor unless they have a JD and multiple years’ experience handling business bankruptcy.

Working with an attorney will ensure you can exit your business preserving the relationships you forged while limiting the total liability of losses. Be sure to talk to a few attorneys to review fee structure and overall plan, but never sign a retainer agreement until you are 100 percent certain you have chosen the right attorney. Anything less than that, keep asking questions or keep looking because this professional will make the difference between being able to recover in a few years and being out of business for good.

2. Have an open and honest discussion with employees. They know the business is hurting, but they may not be aware of the extent. Once you make the decision to close, hold a meeting and let employees know the ending date. Express gratitude and always offer to give a good reference but be up front about final pay. Never let employees work if you cannot pay them as the labor board will not care about your individual woes. You run the danger of employees walking out on you, but it will ensure these people understand you are an honest and good person to do business with. They will be good contacts for future projects and possible first hires for your next venture.

3. Communicate with suppliers. Suppliers know they will not be paid on 100 percent of products invoiced. It’s part of the business and an acceptable cost, but what is not acceptable is “ghosting” your partners. This is an entity where you had a trusting arrangement, so arbitrarily cutting off contact is not acceptable, just like in dating.

If you were honest with this supplier when things were going bad, they may have expected that the business will fail. Many will offer a break on invoices, to avoid getting in line for bankruptcy court, or even offer to buy back unsold product. Just as with employees, these contacts will be invaluable in a future venture or provide leads on new opportunities, but a vendor who was outright burned will never do business with you and may even ruin your reputation in another project or even merely getting a job.

4. Remember, just the business has failed, YOU have only failed when you give up. Too often I see business owners attempting to keep a business that will not succeed moving, cashing in assets hoping that “it will turn the corner.” Beyond the sunk cost fallacy and people who have really convinced themselves that just one good quarter will make a difference, many owners see the business as an extension of themselves and a point of great personal price.

Unfortunately, these same owners will let their hubris convince them that predatory loans, pawning family treasure, or putting off tax payments are a solution when they just need to stop, take a break, and start over. Professional counseling, a faith leader, and one’s partner and friends will be invaluable in the days following closure and again will be your champions in your next moves so long as you communicate openly and honestly. This is one of the few elements that one has complete control over, so take the steps to make sure regret affects you minimally.

Chances are you will be applying for a job and chances are hiring managers will be looking at you with skepticism. The skills that allowed you to run a business (sales, time management, problem solving) are invaluable as an employee, but there will be a hurdle in hiring as no one wants to train their competition.

This might mean seeking positions in a separate industry, contract positions, or a burdensome non-compete agreement, but if you intend to give entrepreneurship another shot, be careful that your day job doesn’t bind your hands. Above all, take a minute to relax now that it’s not all on you. Beyond paying bills, developing skills, and building capital, some time as an employee is a good chance to reflect, see what went wrong, and prevent those problems in the future. 

About The Author

Trapezoid Business Services is solely owned and operated by Daniel Steyskal. Daniel has been a POS provider and business solutions consultant since 2008 working with small to midsized businesses and national franchises. When he's not making the impossible possible for his clients, Daniel enjoys cooking, gaming, and volunteering in his community. Find out more at www.tpzbusiness.com.