My favorite B&B has experienced this problem.  I wrote about Olde World B&B last year, after the new owners took over.  They are gone now, victims of the downturn and the very slow travel market.  The old owner took over the business, for which I’m thankful.  But I got to thinking about how difficult it must be to make the decision to close a business.

My husband owned a rental business in the late 1980s and he experienced the same thing – he had to close within the first year because he just didn’t have enough capital to keep it going.  So how do you know when to give up on your business?

The first sign. The first indication that you will have to close is when you can’t pay your bills.  That sounds obvious, but for many small businesses, it may seem like a temporary situation.  They keep thinking, “It will get better.  We’ll sell more next month and things will be fine.”  Then next month comes and the negative cash situation continues.

The next sign. After a few months of not being able to pay the bills, two things happen:  You begin to think, “Maybe I’m not going to make it,” but also, “This is just temporary.  I will get more cash to ride it out until things start improving.”  You start using your business and personal credit cards to finance day-to-day operations.

The next sign. Soon it becomes apparent that you might be able to let a few bills slide, but you can’t ‘make payroll.’ Since it’s not likely that people will continue to work for you if you don’t pay them, you have to lay some off.  You try to keep a few, but when you can’t pay even those few, it gets closer to the time to shut the doors.

The final sign. When you can’t make the monthly payments on your bank loan, the loan manager calls you in for a talk.  At that point, you realize you aren’t going to get out of this without either (a) Winning the lottery or (b) Having someone hand you a wad of money.  So you talk to your attorney about business bankruptcy.  Maybe you can keep going in Chapter 11.  Most likely you can’t.

At the end. You announce that you are closing the doors.  You have an auction, like my husband did, and get as much money as you can from your business assets in order to pay the bills. You don’t want to see any creditors get stuck, but the bank wants its money first, and the rest of them get what is left over.

After a few months, the hurt fades a little, but not much.  And you think, “If only I had had a little more time, another ad, another sale, a few more customers…a little more money.”

The mark of a true entrepreneur is the person who says, “I’d like to try again.”

Image: StockXpert

Post from: Small Business Boomers