The process of a business needing to close is far longer and more drawn out than many people think. It’s incredibly unlikely that you will wake up one day and realise, for the first time, that your business is on the brink of having to close. You will have warning; you will know that your business is struggling, and you’ll probably have made an effort to try and prevent the worst from occurring.
Sadly, it is an unavoidable fact of the business world that sometimes the worst does happen. No entrepreneur wants to think that they will be contributing to the business failure statistics, but someone has to be at the helm of the companies that fail. If you find yourself in that position, the fact you have had forewarning is, at least, helpful— as it gives you time to strategise your next steps.
If your business is on the brink of failure, then figuring out what you’re going to do next is essential. As this is undoubtedly a confusing and upsetting time for you, you’re unlikely to be at the top of your decision-making ability, so we’ve put together a step-by-step guide that can help you manage this difficult time.
Step One: Write down everything you have learned
There is no better time to write down everything you have learned from your experience of running a business. Do this now while it’s fresh in your memory. While you should, of course, note down the reasons you feel the business has failed and what you could have done differently, it’s also important to note the positives too. You will one day see the failure of this business as a learning process, so make sure you take the time to record everything you need to learn.
Step Two: Begin to consider your next options
Before you begin the process of wrapping up your business, take a moment to think about what you want to do next. Most importantly, you need to know whether you’re going to go back into employment or try and open another business.
This decision is crucial, as it will influence a number of steps as you close down your business. It’s important to note that there’s no “right” or “wrong” answer here; you just have to do what works best for you.
Step Three: Find out where you stand in terms of taxes
If you are winding up your business, you’re going to need to know what’s in store for you in terms of taxes. The fact that your business will no longer be in operation means that everything you have currently known or been expecting regarding taxation is no longer relevant, so start from scratch. Realistically, you will need at least some input from an accountant on this— tax is incredibly complex at the best of times, and even more difficult when you’re struggling with the emotional impact of your business closing down. It’s therefore important to obtain expert advice to help you navigate this complex process.
Step Four: Strip the company for assets
As the business begins to wind down, turn to stripping the assets from the company. How you do this is entirely dependent on the type of business you have been running. If you have been running a beauty salon, then the leftover products you have can be sold on to other salons. If you have been running a construction company, you will want to consider auctioning heavy equipment. These are just two examples, but they make the point: consider your business niche and then break the assets down from there.
Remembering that every business has different assets is incredibly important at this juncture. You won’t be able to make checks against an “assets to sell when closing down” list, nor can you look at examples of what other closing-down businesses chose to sell off. Your business’ assets are unique, so spend a little time identifying them, and remember there may be money where you least expect it.
Ideally, you want to break even on the sale of assets, but this might not always be possible. If that’s the case for you, then that’s okay— it’s better to get some money back than nothing at all.
Step Five: Settle any outstanding debts
When you have made as much money as you can from the sale of the business assets, your first priority is to pay off the company debts. The last thing you need is creditors chasing you when you’re trying to move on to a new phase in your life, so even if you aren’t compelled to pay off the debts, you should do so anyway. It’s a clean break, and that matters most of all at this point.
If you can’t settle all of your debts, then you will need to consider your other options. This is likely to be an extremely trying time, but try to see it as another step on the road to a brighter future for you.
Step Six: Close down the bureaucratic avenues
With the finances dealt with, it’s time to start closing down all the bureaucracy from your business. For example:
- Shut down business bank accounts
- Close your tax accounts with government offices
- If you rented premises, end the tenancy and cancel the utilities payments
- Close subscriptions and professional memberships related to the business…
- … and so on and so forth.
It may take awhile to go through this process, but you’ll feel so much better when you have finished.
Step Seven: Start again
Starting over after a business failure is never easy, but you can do it. Whether you use any leftover cash from the asset sale to restart a new business or return to life as an employee, it’s vital to remember you’re right at the start of a new journey. It’s a shame that your business didn’t work out, but who’s to say that’s the end of the story? There could be something even bigger and better waiting in your future. Good luck.