During the past 10 years (actually for much longer) money has been easy to get. Lenders were everywhere, home equity was abundant and increasing at unseen rates and money literally was flowing in the streets. With this perception of easy capital came opportunities not seen for many years and many took this new horizon to start a new business. Some of them had a good solid foundation, but many did not.
So what do we do now?
If you look at all the businesses out there, you cannot deny that the odds of success are sometimes overwhelming. Certain businesses are far more prone to failure than others, but statistics show that over 60% of new businesses will not last beyond their fifth year. Restaurants, transportation and clothing boutiques generally have a higher failure rate than the norm, but these are just averages. Many factors can contribute to your success or failure, including experience, financial backing, and location. With all that being said, now that the economy is in a downturn (aka Recession) with the third quarter of 2008 having negative GNP of .03%, the first time since 2001, you cannot escape the concern and fear in the public’s mind.
How do I survive?
If you are one of those businesses that are barely hanging on, you must make an honest assessment of your situation, especially your cash flow and debt structure. SCORE counselors can help you with that. If you already have a business line of credit, now is the time to “test it out” which means, try to tap into it to make sure it’s still available. You should also have a sincere conversation with your banker or lender to get their take on how they view you. If you do not have a business line of credit and you have no credit available through other sources including equity (or lack of equity) in your house you have to ask yourself, “how do I survive if things go wrong?”
When do I cry “UNCLE?”
As much as we strive to be optimistic and as much as we have faith in our abilities to survive any downturn, sometimes valor is best achieved by crying Uncle and cutting your loses. In military terms you cannot always win the war, but sometimes you can get more done by winning the battles. If you see that you have no fallback position and your business is losing more money every month it may be time to throw in the towel.
Recovering and moving forward
Worse case, it’s time to call it quits, so you must try to salvage what you can. In order that would be; your sanity, your family unity, your money, and your credit. Again, this may not always be possible so you must think not just of your current situation, but down the road and to your next venture. Is it time to get a job? Is it time to redirect into a new career? Only time will tell, but make every effort to not let this failure determine your life or your future. Most every successful businessperson has had their share of failures and that typically is the price of future success.