Chapter 11 | After You Open—Keeping on the Path to Success | 187
money. If you decide to get out of business, you have these basic options:
Lock the Doors and Leave Disappearing is almost always a bad idea unless you plan never to come back. Walking out creates more problems than it solves, not to mention the hassles you will cause your landlord, your lender, your other creditors, and your friends.
Sally’s Book Shop: Balance Sheet Assets Cash
$
Inventory at cost Fixtures and equipment at estimated sales price Total Assets
This may be a realistic option if your business makes a small profit, or sometimes even if it doesn’t. Someone else may be satisfied with less than you are or may have visions of how to make a better profit. If you can’t raise enough cash to pay your creditors and they aren’t willing to take less than the face amount of what you owe them, you may have to declare bankruptcy just to get rid of the business. Or, if you’re lucky, you may find someone willing to buy your business and try to turn it around. Make a balance sheet for your business similar to the Personal Financial Statement you created in Chapter 5. A simplified version might look like the following example, although you will want much more detail. Example: Sally’s bookstore has been
limping along, almost breaking even for nearly two years, and Sally can’t afford to keep the store open any longer. After preparing a balance sheet, Sally sees that if she can sell her business for at least $16,000 cash, she can pay her creditors and come out clean.
32,000 5,000 $ 37,200
Liabilities Accounts payable
Sell the Business
200
Income taxes and withholding payable Total Liabilities
$ 15,000 1,000 $ 16,000
Close the Business and Negotiate With Your Creditors If you’re losing money every month and don’t think your cash flow will improve soon, you can close your doors and make deals with your suppliers and other creditors. You can often negotiate to pay much less than what you owe. You can offer them a small lump sum payment or you can offer to make monthly payments. Either choice can be a good option if you have the money or income to make payments.
Hold a Going Out of Business Sale This usually involves selling all your merchandise at or below cost. It frequently makes sense for retailers, because inventory of goods for resale is usually the retailer’s largest asset. There are firms that make a business of liquidating businesses, or you