What to Do When Your Small Business Fails

For most people, there is something incredibly attractive about being your own boss. You can set your own hours, exert greater control over your life and spend time working on things that you truly value. Maybe that’s why between 700,000 and 800,000 new small businesses are started every year.

Of course, there’s a downside to being your own boss, too. When things go wrong, you can’t blame your boss! The truth is that about one-third of all small businesses don’t survive two years, and about one-half never make it past five years. Only about one-third will last 10 years.

With that in mind, maybe it’s not too crazy to consider the reasons why small businesses fail and the options available to them when things are headed south?

What’s the most common reason for small business failures?

In a recent survey, 82 percent of businesses cited cash flow as a key factor in their failure.

What do small business owners say are the largest challenges they face?

  • Economic uncertainty
  • Cost of health insurance benefits
  • Declines in customer spending
  • Complying with regulatory requirements

What about startup costs and financing?

Business owners often must invest $50,000 or more in setting up their business. About one-quarter of small businesses claim they can’t get the levels of financing they need to grow their company or to keep it afloat.

Is bankruptcy an option?

When companies start being pressured by their creditors and struggle to pay off their debts, their options could be extremely limited. That’s when you might want to consider working with an experienced small business bankruptcy attorney.

Even though there will be consequences to filing for bankruptcy, like lower credit ratings, it can provide some companies the break they need to keep their company up and running. Once a company files for bankruptcy, an automatic stay takes effect, preventing creditors from taking further collective actions.

What bankruptcy options are available for small businesses?

  • Under Chapter 11 bankruptcy, a small business with sufficient cash flow can stay open and make smaller monthly payments to creditors.
  • A company without cash flow can use Chapter 7 bankruptcy to close efficiently and transparently.
  • In some instances, a sole proprietor can keep a business open by filing a Chapter 13 bankruptcy.

Is your small business in trouble financially? There are several options to explore, as an attorney, like a small business bankruptcy lawyer in New Haven, CT, at a firm such as The Law Offices of Ronald I Chorches, can explain.