It happens! Sometimes your original business model doesn’t work out. In some cases, liquidation can be the ideal way to transform your business. Approached in the right way, it is not the end of your business, but the birth of new, stronger business, and a great way to raise your business from the ashes.
Typically, just before a company goes into liquidation, there is a sense of chaos all around. Business owners try everything and anything to keep their company alive, when, from a business aspect, they should have let it go ages before. Some entrepreneurs don’t get the most out of liquidation because they are distracted by the worry that comes with running a company in heavy debt. It is easy to lose your focus on the long-term goals and dreams you once had for your business. Voluntary liquidation can really be a good thing, especially when there is no other option. It might actually be a relief. Then you can focus on getting the new business started. Before jumping into a new business, take a little time to establish what went wrong and what could have been done differently.
Most business owners might think that debt is the biggest problem in a struggling business. Debt is a symptom your business has a problem, success in your new business can come by identifying the source of the problems. This will help you do two things: Make sure that problem never happens again and put early warning signs in to recognize it is happening.
I know it’s difficult but, take some time to look over what happened in the current business, and where the problems really were so you can avoid them happening again, which will make your new business all the more relaxing.
Identifying the original problem:
The key to success here is to look at the finances but not focus on them.
REMEMBER: debt is rarely the problem!
Step 1. Identify cash flow hiccups. These are points where cash flow has been short, maybe you couldn’t pay bills on time.
Step 2. Identify what caused the cash flow hiccup. Look beyond the numbers here, what was going on in your business at the time? What was influencing your business at the time?
Step 3. Identify the solution. Ask yourself what could have been done to avoid it. The beauty of hindsight is that you can sit back and look at your business in ways others don’t get.
So what if it couldn’t be avoided? Did you miss warning signs? What sort of alarms could you put into place to warn you that it may happen again?
These aren’t going to cover every single problem. But experience tells us that it covers 95% of them.
By taking a little time out after you have started the liquidation process, you can identify the problems that infected the old business and make sure they don’t repeat in the new business. Make sure you either:
- Change the way you do things
- Put warning alerts in place to let you know when they may be cropping up.
Once you have decided to liquidate, you should hire a firm to handle your fire sale for the assets in your business. You will find you have a fair bit of time suddenly available (after all you’re not firefighting anymore.). There will be lots to do with setting up the new business, once you put all the stress behind you.
As Melinda Emerson says, “Remember that you never lose in business, either you win or you learn.”
About the Author: Written by Damian Appleby at Zen Content, in consultation with Focus Insolvency Group. Damian is an expert in the field of insolvency and writes on a broad range of subjects that are of interest to small business owners.