5 precautionary steps to avoid winding up
With the majority of small businesses failing before they reach the 5-year mark, it can seem as though launching a successful startup in today's competitive world is an uphill battle. Nobody ever said that doing business successfully would be easy, but it certainly isn't impossible either. Whether you're preparing for a grand opening or are looking or a way to turn the tables on a struggling business, follow the steps below and you'll be headed in the right direction:
1. Formulate a Plan to Deal with Debt and Taxes
All companies have to pay taxes and most will deal with some form of debt or credit at some point, so it helps to have debt reduction and tax payment plans in place. This is largely a matter of budgeting and accounting, but if you're already head over heels in tax arrears and company debt, it might be wise to seek professional assistance from a company rescue service. Many companies make the mistake of ignoring and avoiding their debtors and HMRC, often leading to the liquidation and winding up of their business due to insolvency.
2. Research Business Planning and Administration Techniques
Again, whether your company is already failing or you're still preparing for launch, if you're not already well-versed in business planning and administration methodology, this is a topic that you should be deeply entrenched in until you're confident you have a firm grasp on all the fundamental concepts.
3. Minimise Dependence on Credit
Just because you can take out a £50,000 loan, doesn't mean you should. In fact, you should do the exact opposite – make every effort to minimise business risk using as little credit as possible. Ideally, you don't want to start committing to debtors and investors until you've proven beyond a reasonable doubt that the business will be capable of making its repayments on time.
4. Set Your Prices Properly
You'd be surprised how many business owners feel like they need to have the cheapest prices ever in order to get their first clients. Sadly, many make the mistake of keeping their prices unnecessarily low, to the point of not being able to feasibly sustain operations and repay debtors and HMRC. Surprisingly, setting your prices higher can actually help you attract more clients/customers, because many people are aware that you typically “get what you pay for” and so they'd rather deal with the more expensive provider.
5. Plan for the Worst Case Scenario
Finally, the best way to nearly fail-proof a business is to design your entire plan around the most pessimistic outlook. Instead of thinking “I can probably make x amount if everything goes good,” you should be planning with the mindset: “Even if I can only achieve minimal success, I expect a minimum revenue of x amount” and do all your planning around that low number. That way, even if results aren't immediately optimal, you'll already be prepared to keep the company afloat during the slowest of times.
Don't Rush Into an Endeavor
Finally, as a bonus tip, save yourself the hassle of being poorly prepared and exercise some good ol' fashioned patience. Take the time to do your research and planning, even if it means delaying the launch of the company by another month or two.
