I recently wrote a 2-part series on strategies for California business owners to stay in business while filing for Chapter 7. However, saving a business isn’t always possible. Here are some of the signs that I look for when telling a client that it may be time to close their business.
- The professionals say you should close. Many business owners have an emotional attachment to their business and do not wish to be an employee of someone else again or perhaps they are afraid to admit that their business is failed. Some businesses are like men that won’t stop and asked directions: advice from a trusted advisor such as a CPA or attorney that a business is in trouble is not given lightly.
- You aren’t making as much money as you thought. An important factor that business owners need to remember is the value of their time. One way to measure how much money a business owner is making would be to calculate the net profit and divide it by the number of hours they work. Many owners may find that they would make more money working as a cashier at the local 7-11.
- You are always struggling to pay your quarterly taxes. A common problem for business owners is the inability to make timely payments on their quarterly taxes. A high gross income does not guarantee a profitable business. If you are delaying payment of taxes for cash flow reasons, your business is in trouble.
- Things will get better next month. Some business owners insist that they only need a good month to make up for past loses. Counting on increased business without a plan of action to grow revenues is not unlike playing the lottery: anything is possible, but not very likely.
- The future for the industry looks bleak. In the past year or so, I have handled a number of bankruptcy cases for people in the printing business. Businesses are advertising less, buying fewer business cards and printing their own letterhead. If a particular industry is shrinking, it may be time to get out.
- The business isn’t worth much. Like the illusion of short sales in real estate, some business owners greatly over value their businesses. An experienced business broker can give you a very realistic opinion on the value of the businesses. Declining business values maybe a sign that it is time to get out.
- You have no retirement plans. If a business owner is too caught up in the day to day operations of the business to be able to plan for retirement, then a change may be necessary.
About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.
nice sharing.and good way to given the kind information to the people.
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