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How Did Things Get This Way?

Yes, the economy is a mess and expenses are rising faster than your blood pressure, but there’s more to it than that.

There are more small businesses losing money right now than anytime since the Great Depression. The main reasons are:

  • 1. Sales are down. Competitors may have taken some of your best customers, or overall demand is down for what you are selling. Either way, you are selling less than you need to.
  • 2. Costs are rising. There’s no denying that costs are rising. Unless you are able to raise prices to counteract rising costs, your gross profit margins shrink. This creates an immediate cash flow problem, because operating expenses tend to remain the same.
  • 3. Too much debt. If you’re like most business owners, when you start losing money, the first thing you do is borrow more money to make up the losses. The more you borrow the deeper the money pit gets. Pretty soon you’re in so deep you can’t climb out.

    • A small business turnaround is a step-by-step process that (with the agreement of creditors) leads to a reorganized and profitable business that can pay its bills as they come due, whose assets exceed its liabilities, and whose owners can pay themselves what they are worth.

    In a turnaround, you:

    1. Control the cash so you can stay in business
    2. Reorganize your business so it will produce positive cash flow
    3. Restructure your debts to the level your cash flow can support

    Moving through this process is not difficult, but it helps to have a guide.

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