Folding Your Business? Here’s How To Minimize Financial Loss
Folding your business isn’t an easy decision, but sometimes you’re left with no other choice. Whether your business failed, you’re retiring, or you’re starting a new entrepreneurial project, minimizing your financial losses is a priority.
- Treat your employees with consideration
Closing a business negatively impacts more than just you and your customers. The way you handle layoffs will affect the remainder of your team. If your team doesn’t support you in your final days, it won’t be a smooth transition.
“If employees who lose their jobs are treated impersonally, unfairly, or without respect, the productivity and loyalty of their remaining colleagues will suffer, says Kenneth W. Freeman, in his article The Right Way to Close an Operation. “Recruiting new talent will be more difficult. And customers and suppliers that feel burned by a shutdown may retaliate against the rest of the company by diverting business to competitors.”
Freeman was working for one of two unionized Corning plants that made glass for color TVs when business dropped and one plant had to close. He describes exactly how he got his employees to give their all.
Though not legally obligated to, he decided to be honest with his employees. Freeman put his employees first, and because of that, they put him first.
He told employees nine months in advance that the plant was closing, and explained that they needed to build up enough inventory to serve their customers while they transitioned to a single plant. Freeman, along with his colleagues, helped their workers line up new jobs. In the end, the employees worked to their highest capacity until their last day on the job. Customers were never shorted on service and continued their loyalty when the plant closed.
- Sell your equipment and other assets individually
It takes work, but selling your assets and equipment individually can help you offset financial losses. Post your items to Craigslist, and ask other businesses if they need anything you’ve got. If you’re hosting a “going out of business” sale, make sure your signage tells people your fixtures and equipment are up for sale, too.
Provided you legally own them, you can sell items like:
- Shelving and other fixtures like gondolas
- Lighting and lamps (as long as you are the legal owner)
- Furniture (desks, tables, chairs, couches)
- Appliances (refrigerator, mini-fridge, microwave)
- Neon signage
- Networking equipment (routers, switches, cables)
- Office equipment (copy machines, computers, phones, printers)
- Cubicles and partitions
If you have older technology, don’t assume nobody wants it. In fact, businesses often look for used or refurbished equipment to save money.
If you’ve got networking equipment like routers and switches from companies like Cisco, Juniper, or Arista, sell it to BrightStar Systems for some cash. Donate your old desktop computers to a local school or church.
- Complete with existing business loans
You’ll need to be honest with your lenders about closing up shop. If you don’t have any reserve capital, and you’re not starting a new business, filing for bankruptcy is a consideration.
Don’t destroy your credit score by not communicating with your lenders. How you respond to your current situation will dictate how lenders will respond to you in the future.
- Time your sale
Selling a business when it’s not profitable makes it hard to attract buyers. You might only get lowball offers from larger corporations looking to swallow up the little guy.
If you’re not in a hurry to liquidate, take your time. Take at least a year to plan the sale of your business. During this time, strengthen your business structure and customer base in order to make your business more profitable.
- Organize your documents
If you’re selling your business, have at least four years’ worth of tax returns available to review with your accountant. Create a list of all the equipment you’re selling. Make a list of the vendors and associates you do business with, and find your current lease. These are the documents potential buyers want to see. Being unable to provide a copy of these documents will make good buyers walk away.
Minimizing your financial losses requires taking the time to do it right. If you’re selling your business, give your buyers every reason to close the deal. Set them up with the right foundation. If you’re just selling equipment, sell it to the right people so you can pay off your debts, pay your employees, and move on to your next venture.
