As difficult and just basically sad is a shutdown, there are ways to not make it worse. Below are listed some suggestions that may be helpful. My hope for you during the process of shutting down Is that you carry away suggestions contributing to your future. You will have a future and one of the purposes for this book is for you to have a personal plan bringing hope and reestablished confidence.
Use Bankruptcy to Buy Time
You can buy time, not shut down, if you move your company into the legal status of bankruptcy.
In the US and other countries, there is a system of legal rules and procedures with judges that offer struggling businesses an opportunity to step inside a safe room that no one else can enter.
The intent is to give the company’s leaders time to figure out a plan that will enable the business to survive. While in bankruptcy, you’ll be allowed to stop paying creditors (such as suppliers, banks, landlord and contractors), and they cannot take legal action to force you to pay them. I’ve seen several startup leaders make the necessary changes to their businesses and emerge to fight another day.
Here are some of the important things to know about using bankruptcy effectively.
- You’ll need a good bankruptcy lawyer. Your corporate attorney will make a recommendation and introduction. These are specialists and will enable you to make the most of the time that you are given to proceed to a point of restarting the business in a healthy financial condition.
- You’ll need cash to pay the bankruptcy lawyer. Be prepared, plan ahead so you have the cash on hand you’ll need.
- You’ll need a prepared plan so you can operate the business in some form during bankruptcy. Get started, document your plan. Prepare details such as names of people for your layoff or furlough. Include steps to communicate with suppliers, contractors and landlords that you’ll stop paying for a while.
- Get ready to negotiate with all stakeholders. You need to “cut a deal” with creditors, investors, suppliers, contractors and employees. It’s in the best interests of everyone to compromise. They all will benefit from your business returning to healthy operation once again. I’ve found this is a process that takes time and is very stressful for first-timers. Get advice from your attorney. Ask board members with negotiating experience.
- Start soon. Most first-timers wait until it’s too late to make the most of bankruptcy. Your objective is to buy time, enough to work out what needs to be done with the remaining cash on hand.
Hang in there, it’s not the end of the world, it just feels that way.
I wish you The Best on your Adventure!