The term ‘bankruptcy’ can be intimidating and carries some baggage. What many people don’t know is that bankruptcy is a common business process. According to statistics from the Administrative Office of the US Courts and compiled by Trading Economics, over 60,000 businesses have claimed bankruptcy so far in 2018. While bankruptcy brings an end to a business, it provides opportunities for entrepreneurs to move onto their next scheme.
Coming out of a bankruptcy and being able to forge ahead does, however, require planning. This ranges from taking stock of your personal assets and your business and personal credit scores, to taking steps to ensure you’re a feasible proposition for future investors, to developing your finance skills. Do all of these steps well and you’re set up to profit again.
Clearing Up Your Loose Ties
It’s important to undertake the correct type of bankruptcy. The vast majority of bankruptcies are taken under section 11 for businesses, but as Entrepreneur magazine outlines, there are alternatives to section 11. Finding the right option is crucial, according to one Scottsdale bankruptcy lawyer, who have noted the cross-cutting nature of bankruptcy sections and how state law interacts with it in that respect. Essentially, take legal advice to ensure that your bankruptcy is the right one for your personal and business circumstances.
Putting Your Finances Into Order
With a bankruptcy undertaken, the next step - or while it’s ongoing - is to ensure that your finances are entirely in order. Your credit score is a key part of this - both personal and business based. A personal score is influential on your business suitability, too; as Fundera have suggested, a 700 score will help your opportunities. Try and keep your personal finances in order to this effect.
Not every business fails due to cashflow problems, but it’s helpful to improve your budget capabilities wherever possible. There are apps available now that can help you to manage your finances and provide tips on consistent management. This will be reflected in any business plan you put forward to potential investors in the future.
Success Stories From Bankruptcy
For inspiration from this difficult position, you don’t have to look far. Apple, likely to become the first $1tn company, filed for bankruptcy in 1997 before Microsoft helped to pick up the pieces. Another, Marvel Entertainment, filed for bankruptcy in 1996 - but today, have movies and a merchandise industry worth billions. American Airlines is another; filing for bankruptcy as recently at 2011, the company was entering the influential S&P 500 by 2014.
Bankruptcy is not the end - in fact, it can be the new beginning. The process offers relief for your business to find steadier ground and to build from there. As some of the biggest companies in the world have clearly shown, bouncing back is entirely possible and can bring you to even greater heights. If you can get your finances in line to present a cogent and sturdy business case, you can stand to benefit.
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Hi Jack, thank you for the encouraging post. I’m taking a big chance on my business, established 5 years ago and I made 6 figures constantly in the beginning. However past 12 months I’ve been struggling to carry through, now I’m in a joint venture with a publishing company which could go right or wrong, nobody knows. If it goes wrong it’s likely I’m going bankrupt. But this is not the end of the world. I’m planning well ahead for the worst case scenario. I’m pretty optimistic. Your information helps. Cheers for the encouragement. K.
Thanks for your comment, I’m glad to hear that the post helps!