The majority of new businesses fail; some estimates say up to 90% don’t survive. If your business didn’t thrive, know you are not alone, and you are not a failure. “The only people who never fail are those who never try.” Be proud of what you accomplished. After a small business failure, use what you’ve learned to fuel the success of your next endeavor.
But before you jump into your next adventure, take some time to ensure you have a strong financial foundation to help propel you forward and build a successful small business. Here are some steps to help you make smart money moves.
If your business included machinery, technology, furniture, etc., consider selling these items to cover any outstanding bills from your business. If all your accounts and employees have been taken care of, this money could provide you with starter funds for another business endeavor or a lump sum to help you with day-to-day expenses as you determine the next step in your career.
- Secure an Income
Identify things you learned from your recent small business failure and determine how you can best apply that to the next step in your career — whether that’s another startup, a return to what you did before your business or a new line of work altogether. If you plan to start another business, consider first finding a job with a steady income. This will allow you to take some time to ensure you’re ready for that next endeavor — psychologically and financially. You can use this income to support your next venture and avoid common financial mistakes made in the beginning stages of a startup. Give yourself the time and space to analyze the successes and failures of your previous business, create a new plan and begin working through details while you are bringing in a steady income. Most businesses don’t become profitable until after the first few years, so the more progress you can make while you have another income, the better off you will likely be in the long-term.
- Prioritize Paying Off Debt
If you took any personal debt while managing your business, make a budget and prioritize paying off these debts. High interest rates and multiple loans can quickly spiral out of control if you can’t get a handle on them, which can negatively impact your personal life as well as any future businesses. If you can, renegotiate with creditors for a better interest rate so you can continue to meet all your financial obligations.
- Keep Business Records
After a small business failure, it may be painful to hang on to things from your business. But it’s important that you keep all business records for three to seven years. This includes tax information and employee records. You want to ensure that you have records in the case of an IRS audit or a legal issue.
- Meet with a Financial Advisor
You don’t have to figure out your next steps alone. A Farm Bureau Financial Advisor can help you as you sort through the present and plan for your future.