Deciding When To Wind Up A Business

October 2, 2008


Deciding whether you should wind up your business isn’t easy. I’ve had to make the decision to wind up a business myself and I learned a lot from the experience. And if you’re faced with that decision, I hope these guidelines will help.


Do You Have A Choice?

Much of the time, if a business is performing badly, the decision to sort the problem out, or wind up the business will still be in your hands, if you tackle the problem quickly. And this is a good thing, because it means you are in control of the outcome.

That feeling of control is important if you decide to wind up a business. I think when some folk talk of failing, after winding up a business, it’s often because they felt helpless, as they were no longer in control. And that’s a shame, because it can put them off trying again.

If you are still in a position of control, ask yourself the following questions:


Is The Story Still The Same As It Was When You Started This Business?

Are you still passionate about this business?
Is there still a demand for what you’re selling?
Is your industry being affected by an economic downturn? What can you do about it?
Do you have enough cash to keep growing the business?
What other problems does the business have and how can they be resolved?

Are You Still Passionate, Or Were You Ever Passionate About This Business?

The passion factor has been much debated. You certainly don’t need to be passionate about the technical aspects of your business but it does help if you’re interested in learning more about your industry. The business I wound up was a plumbing business. Now I’m not a plumber and I never intended to become one. But that didn’t matter.

I was passionate about my vision of what a plumbing business could be like. Trouble was, my vision was a lot different to the way the industry is now, so I was met with a lot of resistance, not from customers but from the people I employed. They liked things the way they were and I thought the industry sucked.

To overcome that resistance, we knew we’d have to train people from scratch and because of the financial position the business was in, I couldn’t see it happening for a couple of years. So I decided I’d rather be doing something I was passionate about now.

* You don’t always have to make money back the same way you lost it. A lot of folk make that mistake. If you’ve lost cash in a business and you’re not passionate about that business, you’ll probably find it’s easier to make it back if you do something you love to do.


Is There Still A Demand For What You’re Selling?

Did you research the demand for what you’re selling? Does that demand still exist? Often, demand can decrease if the economy is in trouble. And sometimes, new technology can make what you’re offering redundant.

The construction industry was hit hard in our area. Bigger, better established plumbing businesses began to go bust and many builders stopped building. Also, people just weren’t spending money on things like new bathroom suites.

Now an economic downturn doesn’t necessarily mean you’ve got to wind up your business - especially if you’re still passionate about it. For a start - you could diversify - if you can afford to.

Can You Afford To Diversify?

Consider what will it cost you financially to diversify and whether you have the necessary skills or experience. You have to be brutally honest with yourself when you’re doing this and consider the downside.

For example - we had the chance of two large contracts. We could have made a huge profit if we’d gone ahead with them. But after a lot of consideration and getting outside opinion, we turned them down because we didn’t have the knowledge and experience to do the type of work we were offered. Plus, we’d have needed to borrow in excess of £100,000 personally. For me, the potential downside far outweighed the possible gain.

*If you find yourself in a similar position - work out what you could lose if things went wrong and decide whether your business could stand that risk. Business isn’t about taking foolish risks, you’ve got to measure each one carefully.


Do You Have Enough Cash To Keep Going?

Do you have enough cash to keep the business running, if there’s a decline in trade? Are you being realistic? Sometimes having enough work coming in isn’t enough and you need to allow for unexpected hitches.

In our case, I figured that we’d have enough cash to keep going for a year but we really struggled towards the end and I wound up having to sell personal items. It was partly due to problems I hadn’t anticipated.

For example, we overestimated the experience of a couple of people we took on. They didn’t get the work done in time and because we charged per job, rather than by the hour, we started losing money on the work we were doing.

Also I was relying on money I was owed from a business I’d already sold and I didn’t get paid. I still haven’t been pid but now I’ll make sure I do. And you can bet that the person who stood in the way of me getting my cash will be truly sorry.

*If you sell a business - make sure you collect in all your cash before you start another one, as you may not have time later. Also, if things start going wrong in the early days of your business, do something about it as soon as you can, instead of hoping things will improve.

Small Problems Are Different

Businesses will have small problems all the time. And so long as you can find a solution to them - and your business story hasn’t changed, you should be able to ride them out, so long as you don’t have too many at once. Things like short term cash flow problems, staffing issues, theft, damage to business premises, short term shortage of work etc can all be overcome. But it may be more difficult if you have several problems at once.

Business Problems I Haven’t Mentioned

There’s many problems you may face that I haven’t mentioned. Things like ill health, loss of business premises, partnership problems, or even the death of a partner could cause problems in your business. But you can make a contingency plan to enable you to deal with these type of problem if they arise.

If you’re considering winding up a business, I hope these guidelines have helped. Can you think of any additional problems that might cause you to wind up a business? Do you have any questions?

I wrote this article in response to a question from Avani Mehta. Avani has written an excellent anger management series and you can check out part 1 here: Decoding Anger: Anger Management Series Part 1.

Image by Kenneth Lu

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Don’t Add This Poison To Your Business Cocktail

September 26, 2008


I was sitting here feeling a bit sorry for myself yesterday. I’m choked up with the cold bug from hell. I always get cold or flu around this time of year, when there’s lots of bugs around. It’s the only time I wish it would freeze and kill the little buggers. And my husband - Stuart is away for a few days, so I miss him. I hate having to make my own coffee.

Anyway, I was feeling kind of sad because Stuart and I have decided not to work together anymore, after five years of doing so. First, Stuart worked for me, in my fire and flood restoration business - that is how we met, then we ran another business together.

It’s a smart move - we both have different things we want to do., I shouldn’t have been feeling sad - because I don’t normally throw that lethal poison into my business decisions: emotion. And you shouldn’t either.

Emotion Poisons Your Decisions

Many people do make decisions based on emotion. And plenty of advertisers are aware of that, which is why so many people are up to their eyeballs in debt. But if you allow emotion to influence major business decisions, instead of relying on your head and your gut instinct, you could wind up in serious trouble.

Becoming Too Attached To Your Business Can Prevent You From Moving On

When I sold my fire and flood restoration business, Stuart left at the same time as I did. He admitted feeling sad, on that last day. But I didn’t even allow myself to think about feeling that way. I did love my business - we provided a great service to our customers and I really enjoyed my work.

But I had good reasons for selling. Some real chauvinistic assholes were deliberately making my life difficult (it was a franchise) and I was also tired of getting paid late and in some cases, not getting paid at all. Plus, I’d been planning to sell a couple of years down the line, as I wanted to do something on my own. So for me, it was the right move. Once you’ve made a positive decision to sell a business, you should never allow emotion to cloud it, or you’ll find it impossible to move on.

*If you find you’re feeling emotional when it comes to selling a business, ask yourself if your reasons for selling have changed. If they haven’t, be satisfied that you’ve made the right decision and that the change will be a positive one.

Allowing Emotions To Influence Business Decisions Can Cost You Money

When we made the decision to wind up our plumbing business, once again Stuart felt sad, as we wouldn’t be able to use the same branding again and it was eyecatching and effective. But I quickly reminded him not to think about it anymore. We’d be able to develop better brands in the future.

Once I’d made the decision to wind up the business, I didn’t allow it to upset me at all, because it was a positive decision. I’d only allowed it a year to break even. But a few hiccups had prevented us from meeting that target.

I know a year isn’t long, if you’re putting quite a bit of cash into a business and employing folk right from the start. But, we’d ran out of cash, because I was still owed money from my fire and flood restoration business (I still am - but that’s another story).

If I’d enjoyed the business, I’d have borrowed the money to keep going. But we’d planned to sell it after seven years and I’d realised that I simply didn’t want to commit that amount of time to it. I just didn’t have the passion for that type of business. And we’d made a mistake starting it, but ending it was a smart thing to do.

Too many people avoid winding up a business for the wrong reasons. Sometimes they don’t want to take the financial loss, or they worry about the stigma attached to doing so and often they simply don’t want to admit they were wrong. And all these thoughts prevent them from doing the right thing.

If You Find Yourself Feeling Emotional About Any Aspect Of Business - Stop And Ask Yourself Why. The only reason you should try to save a struggling business is because you really want to, you’re passionate about the business and because you know it can still work.

So, I didn’t allow emotions to effect my decision making in either of those situations. Then why on earth did I get upset that Stuart won’t be joining me in my new business venture? I stopped to ask myself why and the answers were fairly simple.

I have a cold from hell, so that is making me feel week and vulnerable. Plus I have PMT, so that is making me feel a bit down. My husband has been away for a few days, so naturally I miss him but that doesn’t mean I need to work with him.

Reminding me of these things made me realise that I’m not really upset about this new positive change we’ve made. It’s silly little things that are making me feel sad.

So Don’t Forget: If you find yourself using your emotions to make a business decision, ask yourself if other problems are causing you to feel that way.

Image Credit: The Bitten Word

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Why You’re Not Making Lots Of Money

September 17, 2008


Do you have a goal of making lots of money? You’re not alone. When I was using Google’s Keyword Tool before, there’s a ridiculous amount of searches done on making money every single day.

Trouble is, lots of these searchers will never make much money at all. When you’re focusing your attention on making lots of money and nothing else, you’re liable to run into a lot of mousetraps. So how do you identify them and prevent them from snapping shut on your tail?

Mediocrity

The problem: Mediocre ideas are never going to do well. And the reason people keep coming up with these ideas for making lots of money, is because they focus on the money and nothing else. And when one idea doesn’t make them rich within a few weeks, they move onto the next crap money making idea.

If you’ve fallen into this trap, there’s a good chance that you’ve been focusing on a way to make money fast, without thinking about what people might actually want to buy from you.

Solution: Take the time to do some research and find out what people are actually looking for and what will make you stand out from the competition. And once you’ve made a plan, persevere. Don’t expect life changing results over night.

Desperation




Problem: Through desperation, people will type phrases into Google like “making lots of money”, “how to make money fast” and “how to get rich”.

And all the scammers of the day know that desperate people use those search terms. So they dangle a chunk of cheese in front of you, in return for a handful of cash.

The searcher doesn’t make a bean in return, never mind the ridiculous amount of money they’ve been promised. But often, they’ll move from one scam to the next, in their desperation to make lots of money as quickly as possible. And they wind up wasting a small fortune on trashy products that don’t make them a penny.

Solution: Lose the get rich quick mindset and think long term. Is there a special reason why you need to make half a million by next month? Unless you’ve got some seriously massive bills to pay, you probably won’t need it, as you’ll be working too hard on your business to spend money anyway.

Once you stop focusing on making lots of money fast, you’ll find it far easier to come up with a product or service that will provide value to your customers.

Blurred Vision

Problem: If money is your only goal your vision becomes blurred. It’s fine to have financial goals. But at the end of the day, money is just a tool to help you do other things. And your goals are just a number you want to achieve. Eventually, you get bored with these numbers and you’ll need to find something else to focus on, or you’ll never get what you want.

I used to focus on financial goals, because they were the only thing I could think of to aim for. It wasn’t the actual money I wanted - it was the pat on the back I could give myself for reaching my targets.

But focusing on financial goals stopped me from looking at the big picture. And although I achieved some pretty outrageous targets, I didn’t achieve much else. Had I set different goals, I might have had time to go on that relaxing holiday, or go for a massage every week, or spend more time with my children etc. . Instead, I spent all my time working to ensure I achieved the financial targets instead.

Solution: While you do still need to set yourself financial goals, to ensure your business stays on track, don’t limit yourself to these. Set yourself goals that mean something to you. And as well as setting huge long term goals, set small term ones too. What do you want more of in life? Do you want to spend more time with your family, take a world cruise, move into a bigger house, or play golf once a week.

Unrealistic Goals

Some people - especially those who’ve only made money through working for others, set out with unrealistic short term goals. I’ve seen these a lot on the Internet. They’ll begin working part-time and set themselves a ridiculous goal of $1 million turnover in a year, even though they’re investing very little time or money. And these people are setting themselves up for a fall. While some would argue that it’s important to think big, it’s important to think smart at the same time.

Solution:
Instead of starting out like this, it’s far better to make a long term, realistic plan stretching 3 to 5 years ahead. Then work out what you need to do to achieve those goals. It’s no good setting yourself a financial target, if you don’t know how many sales you need to make to achieve it. So work all that out first and break it down into weekly or monthly targets so it’s more achievable.

What other mistakes have you seen people make, when they become obsessed with making lots of money? What advice would you give them?

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Internet Scammers: D70Focus
Mount Everest: Rupert Taylor-Price

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