When companies find it difficult to make their ends meet, they immediately declare a state of bankruptcy. Filing for bankruptcy is not a great idea for small businesses and it is definitely not a solution to the problem. At such circumstances, you must follow the ‘prevention is better than cure’ principle. Instead of thinking about damage control, you need to focus on crisis prevention. This will enable you to prevent the situation from occurring at all. Listed below are some principles you need to follow.
Have an Updated Business Plan
A business plan is imperative to manage and govern a small business. Your business plan is a road map that details every single strategy that you will have to follow. It will include essential strategies for the marketing, manufacturing, budgeting plans of the business. Being spontaneous with your business decisions is risky. Thus, it is better to follow this pre-planned guide instead of following gut instincts. Do not stick to the plan you created years ago. This plan needs to be updated from time to time in order to meet the changing requirements of the consumers. Adjusting your business plan according to current consumer behaviour will enable you to run a consumer-oriented business.
Be Honest with Yourself
The sooner you accept the reality, the sooner you will be able to solve the problem. There is no point in convincing yourself and fooling others around you when you already know that the odds are against you. The moment you receive bankruptcy information, you need to start acting on it. Any delay can only increase the severity of the consequences. Inform the senior management and the employees immediately since keeping the company in the dark will do no good. Do not think of bankruptcy as a passing cloud since it is more of a hurricane. Thus, instead of ignoring the problem, you need to stand up and face it.
Achieve Cash Flow Equilibrium
The financial status of your company heavily relies on the balance of the cash flow. During unpredictable economic conditions, the financial conditions of the company will slowly start to deteriorate. These monthly financial swings are inevitable since no business can expect to make continuously beneficial profits. Thus, instead of trying to achieve high profits, target a balanced cash flow. This way, you will be able to ensure that you will not have to suffer long-term financial repercussions.
Don’t be Sentimental
You cannot afford to be sentimental if you wish to succeed. Giving into myths, beliefs and superstitions can lead you to the doom of your company in no time. Never say ‘we have always done it that way’. The inability to create change and improve standards stems from such conventional beliefs. You need to be open to new ideas and suggestions. When a company realizes that it is approaching bankruptcy, it should do everything within its power to avoid the situation – even if it means it has to step away from its traditional way of doing things.
Always think of bankruptcy as a last resort. It is important to remember that if the core of the company is still strong, if there is enough cash flow to support the business and if the employees are willing to do what is required, you will definitely be able to turn the business around.