If 2020 has taught the business world anything, you cannot take anything for granted. The global pandemic has caused previously successful local stores, some of which were open for decades, to close their doors permanently. Many large, multinational organizations have also been wiped out due to the situation, with businesses in areas such as Georgia and Kentucky seriously suffering.
Yet even without an unprecedented threat like a pandemic that puts the brakes on the economy, there are many other threats which can derail a company. If you’re not careful, your own business dreams could be crushed within an instant. In the state of Georgia alone, usually an area with a great local economy, over 1,000 businesses filled for bankrupsy, demonstrating that it is a real threat for modern businesses everywhere.
To help prevent that from happening, here are four methods to avoid bankruptcy with your business:
1. Stay Conservative in Your Spending
A business is always going to hit a slow patch with sales. When this happens, you want to be prepared. You want to have the money available to see through this rough period and make it to the other side.
One way of doing this is by being conservative in your spending. If you have a healthy nest egg built up, it can be tempting to use this to buy a fancy piece of new equipment or take a risk with an expansion. Yet always be calculated with your spending and never put your business into any unnecessary risk.
2. Have the Right Insurance
When you’re trying to cut down on costs to save money, you might try and overlook paying for monthly insurance coverage. However, this can be an incredibly dangerous move to make. Say you have an employee that breaks their leg at work. If you don’t have workers compensation insurance, guess who’s going to be stuck with that employee’s medical bill – you. If that bill hits five figures or more, your business will likely drop into bankruptcy instantly.
Futhemore, depending on where your business is situated, some insurance is required by state Law. Most states require at least some form of workers compensation insurance, however the details differ drastically. In Georgia, where 2.5 out of 100 workers are expected to suffer a work injury, even part-time works need this coverage. There is even further complications with Georgia workers compensation, as businesses with more than three employees requiring it, which is much different to other Southern states such as Texas, where no business needs to have workers comp. Yet despite the policy, it is still highly recommended to acquire this form of insurance.
Of course, this is only one example. Analyze your business and see what insurance policies will help prevent your business from being hit with a potential bankruptcy-causing bill.
3. Outsource
Hiring an employee is an expensive process. Not only do you have to invest money into the recruitment process, but you also have to cover regular expenses such as their base wage, taxes, and the aforementioned insurance coverage.
One way to avoid this is by outsourcing. By using an agency or freelancer, you can simply pay for work to be done on a project-by-project basis. You’re not tied into a contract, there are no additional expenses, and you can receive work done by experts.
4. Sell Off Unnecessary Business Assets
If you have been in business for at least a couple of years, you have likely accumulated different assets. Some of these assets will still be in use, while others will be sat in a corner gathering dust.
When the latter happens, don’t let those assets sit around and depreciate. Sell them as soon as possible. Leftover stock, old computers, a broken down van – whatever it is, there’s going to be someone out there ready to buy. When they do, not only will this free up on-site space for your business, but it’ll also give it a healthy cash injection.
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