The Entrepreneurial-Based Business
The competitive dominance of entrepreneurial driven companies have historically forged the path of economic growth. Now at the time when such dominance is needed with a vengeance for prosperity and employment, such owners are working hard to stay afloat and survive especially after the recent financial meltdown and the great recession. The fundamental issue is that tools and the conceptual frameworks that work for traditional businesses must be modified to meet the challenges, operations, and new business models of today’s entrepreneurial-based companies.
When dealing with an entrepreneurial-based business, when the company is in trouble, recognizing this fact will give the owner more options for dealing with the problem to save the business. However, by waiting too long, being in a state of denial, not taking decisive action will leave the entrepreneur with little options other than shutting down the business or bankruptcy. Furthermore, the longer the owner waits, the likelihood that the owner’s personal finances will be affected, in the event that the owner’s are personally liable for the business debts. This can leave the entrepreneur filing for personal bankruptcy protection.
Signs of Distress
Every business is different. So the signs that the business is in trouble may not be the same for one company compared to another. However, certain warning signals are clear. The business may be in trouble if:
Bad to Worse
With symptoms like the above, conditions can transform from bad to worse. For example
Options that may be to the entrepreneur include:
When the business is heading towards the “zone of insolvency,” the entrepreneur needs to first decide whether or not to stay in business. This is an important decision. Deciding on whether to cut off a cancerous limb to stop the infections or to treat it must be made.
For an entrepreneur, emotions and egos must be set aside. Issues to be considered must include the welfare of the family and self. Moreover, reflections must be made questioning:
Not all distressed businesses can be saved. Knowing if the company can be salvaged and which ones have little or no chance of survival is important. The sooner that decision is made; the sooner steps can be taken to either begin the process of business turnaround or winding down the company.
Turnaround Basic Questions
Basic questions or requirements that are needed for a successful turnaround must have four characteristics:
(1) Does one or more viable core businesses exist within the enterprise?
(2) Can adequate bridge financing be obtained?
(3) Does the company have sufficient organizational resources and skills
(4) Can the company secured a turnaround manager (leader) to facilitate the daunting restructuring task?
Having poured their hearts and souls in to the business, the entrepreneur must try to be objective about the prospects for the future. Although emotional attachment is there, they should seek professional advice from other entrepreneurs, lawyers, and accountants for recommendations of turnaround professionals. As a start, the membership of the Turnaround Management Association comprises of specialist (Certified Turnaround Professionals) in the area of business turnarounds.
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