Assess your situation first
Before making the decision to close your business, it's important to assess the situation you’re in and look at what options you have.
Whether it’s managing your money differently, pivoting your business or getting expert advice, you may be able to make a plan that doesn’t involve closing down.
Focus on finances
Gather all your financial documents. This will help you and an advisor see the true picture. If you owe people money, a detailed breakdown will also help prevent disputes.
If the reason why you’re thinking of closing down is money trouble, take action.
How much money you owe will determine your next steps, including the following:
- Rearranging your budget – with a true picture of your debts and cash flow, you can better assess how you could repay debts.
- Devise a repayment plan – this will be a good starting point when talking to creditors (those who you owe money to). For example, this could be for loans, unpaid bills or tax.
- Combining your debts – having multiple debts can be tricky and expensive if you’re also running up credit card bills. Consider rolling all your debts into one loan from a bank or finance company. This is called debt consolidation. You’ll be charged one interest rate and deal with one lender, who can help you plan realistic repayments.
Get advice
Get sound advice from a financial professional, like an accountant, bank manager, business mentor or a business turnaround advisor.
Gather all the information you can about your finances and any difficulties you’re facing. The more your advisor knows, the more they can help you.
If you’re simply ready to move on from your business, they can find alternatives to closing down and help you get ready for the next step, like selling your business.
If you’re in financial difficulty, they can help you see where things went wrong and how to get back on track.
Talk to your creditors
Creditors are people or organisations you owe money to – for example, suppliers, lenders, or Inland Revenue.
Debts may seem difficult when you have more money going out than coming in. But if you explain your problem, your creditors may be open to a longer-term repayment plan.
Talk to them early. Creditors may be less understanding if you leave it until you’re thinking about closing your business.
Taxes and levies
If you’re going to close your business, it’s important to file your final returns and pay your taxes by the due date.
If you know you can’t pay your tax on time and in full, talk to Inland Revenue as early as possible. Explain your position and explore what support might be available. If you don’t pay, you’ll be charged interest and may face a penalty.
The same goes for ACC levies. Contact ACC to discuss your options, like paying in instalments.
Look at all the options
Take your time to consider your options and get good advice.
Ask yourself if:
- you still have the passion for your business to make it work
- you’re prepared for the risk
- your creditors and any investors support you to succeed
- you can turn around your business.
Make sure you assess all your options. These might include the following:
Selling your business
When setting a sale price, make sure you take all your assets into account, including intellectual property. If you’re in financial difficulty, a sale might earn enough to clear your debts with some left over.
Changing your business model
Look at what’s working and what isn’t. A new direction, or new emphasis on something you do well, could make a difference.
Seeking funding
Only do this if you have a sound plan for your business – investors and banks will not want to simply provide a bailout. Remember it takes time and effort to pitch for money.
Shutting down
For some, this might be the way forward. It helps to get advice on how to do it right and avoid loose ends.
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