To close or to continue in your business
It can be difficult as a business owner to know when it is time to say goodbye to your business. You put your heart and soul into your business. Invested your time and your savings but how do you know when it is time to stop and move on?
Over the last few years we’ve seen customers struggle with this question. For reasons outside their control, the economy, legislative changes, health, lack of business experience and the market just not being there for their product or service. So how do you know when to call it quits?
1. Can you make a change?
If your business isn’t making a profit, can you pivot to a more profitable option? For many business’ innovation comes from necessity. How can you look outside the box to innovate or pivot your business to be different and stand out from the crowd? If you are completely out of ideas to innovate, pivot and change it might be time to call it quits.
2. Why isn’t the profit there?
Understanding why the profit isn’t there for you is key to knowing when to call it quits. At this point it is important to analyse your books and your business to understand where you are spending your time and your money. Can you change your processes? If you reduce your service time by 10% and your travel time by 10% will your profitability improve? Do you need to provide better customer service and keep your clients coming back for more? Can you automate your processes to save time and money? Can you research and utilise new, low cost marketing techniques to get more customers? If you cannot understand why the profit isn’t there it may be time to call in a specialist accountant or call it quits.
3. Can you increase your prices?
It may seem obvious, but it is a question many small business owners shy away from. By increasing prices by just a small amount you could have a huge impact on your bottom line and the success of your business. Before you raise prices it’s important to understand your customer and their willingness to pay. You should also understand the market prices for similar products and services.
4. Budget
We cannot emphasize the importance of a budget highly enough. As a business owner it is essential to know what income you are expecting and what payments you need to meet. A simple budget can help you understand the minimum income you need to stay in business. It doesn’t have to be scary, simple is often best. It’s about understanding your realistic position and predicting whether you are just in a tough month or if you have an ongoing budget problem. If you need a hand understanding your income and expenditure and analysing how your business is performing a qualified accountant is an essential resource.
5. Plan including creating goals
Whether business is a little tough or you are sailing along and growing, planning is essential! A plan with specific goals will help you to map out your business’ future direction. A good plan will help you understand your mission and what you want (or need) to achieve. It will help you to create time–based goals that will allow you to analyse whether business is really worth it for you. Remember your goals don’t have to be “I want to be a millionaire with no mortgage in 5 years”. They can be as simple as “I want to have the time to read to my child before bed 2 nights per week” or “I want to make my rent payment on time this month”. For every goal be sure to work out a path that can realistically make this happen. If you are uncertain whether to continue your business, shorter term goals are essential. For example “Next month I want to make sales to 4 returning customers, I will do this by providing a discount code of 5% to my email list.” At the end of the month you need to be honest with yourself about whether you met your goal and why. If you are consistently failing to meet your goals and unable to follow your plan it might be time to call it quits.
6. Your health is failing and stress levels are unsustainable
We see this all the time! Business owners that are under so much pressure that they are working long hours, their health is failing, and stress levels are proving unsustainable. In this case you need to ask yourself what is really important to you and your family? Your health and life are too important, this one is actually pretty straightforward.
7. Can you negotiate with suppliers for a better deal?
In difficult times it is more important than ever to get tough and negotiate. Make a list of your suppliers including electricity, internet, raw ingredients, software subscriptions, rent/mortgage, insurances and anything else you can think of. Research the offers of other suppliers and market rates and then get negotiating. Be tough and be willing to change to save your business (and yourself) some serious money. If you are having trouble paying at all, think about how essential the supplier really is to your business, cut down to the bare essentials to understand if your business has a chance at survival.
8. Can you upskill or outsource?
Upskilling yourself to understand the “business side” of your business could help you move towards business success. Can you complete a business planning workshop? Can you work with your accountant to understand your books better? Would employing a specialist manager or consultant help you to turn your business around? Can you raise funds by offering a partnership to someone with the skills you lack? Can you utilise the services of a virtual CFO to help you to build the profitability and analysis of your business on a more regular basis? Outsourcing and upskilling can have impressive results on business, but if you are beyond this type of help it may be time to call it quits.
9. Learn to know when enough is enough
It can be a really tough decision to make but you aren’t alone! Over 80% of businesses fail in the first 18 months. A business ceasing trade can end up moving you towards your true life goals and purpose. It is important to learn when enough is enough. Month after month of unpaid bills, debtors chasing you, sleepless nights, failed pivot ideas, unmet goals, negotiation with suppliers, and advice to cease could be telling you that now is the time to chase a new dream.
We get it, deciding whether to close or continue business is hard and often ongoing. Be sure to utilise the support around you to help you make the decision that is right for you. If in doubt enlist the help of trusted and qualified accountant, their analysis, expertise and unbiased opinion could be the help you desperately need .
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0411 876 912
Any advice in this blog is general in nature and is intended for information purposes only. For personalised advice please contact your accountant.