While many business owners think a debt workout carries a negative stigma, it’s actually the most ethical and rational strategy.
Entrepreneurs call us all the time in a desperate panic because they can’t pay their debt. They want help, but at the same time, they’re paralyzed by a feeling of failure. A debt workout is something they want to avoid because of the negative stigma attached. But in reality, a debt workout is the most ethical and rational strategy. As the owner of a business, you have the responsibility of leading your team to success. Ideally, this means winning more than you lose. But we all lose sometimes. It’s unrealistic to expect to hit a home run every time.
When overhead is unsustainable and revenue is too low, you have two options: you could give up and allow the business to fail, then think about starting again. It isn’t shameful; it’s simply an indication that your company, as it stands now, is just not working.
Your other option is to find a way to overcome unsupportable debt. There are only two approaches to this:
- Increase revenue (an ideal situation, but sometimes this isn’t doable quickly or effectively enough).
- Reduce the debt and create a strategy that allows the business to start again.
The latter choice may sound like bankruptcy—but it isn’t. There are no courts involved, no lawyers, no filings and no legal proceedings.
Reforming Your Business
When a business becomes insolvent (meaning your debts are too great to pay back), it’s time for a reorganization—to flush out that entity and create a new one. It doesn’t mean you failed; rather, it means you have to get back up to bat again. With three opportunities at the plate and nine innings, that’s 27 opportunities to score. It works in sports, it works in life and it works in business.
Failure is a reality of doing business. According to Forbes, eight out of 10 entrepreneurs who start businesses fail within the first 18 months.
Overcoming obstacles is truly what creates success. Guiding your team to better days is what a leader does. Rising from the ashes is not a sign of defeat, but a sign of victory. Doing a debt workout is acknowledging to the creditors, banks and vendors that this equation that you all thought would work didn’t after all. Now you have to create a new equation that will work. Some will get paid, some will get less than they expected and some may not get paid at all. The point is, it’s a far better solution than bankruptcy; it’s a re-birth if you will.
Everyone knows the risks assumed in starting a business. If the machine breaks down, you try again. Vendors can sue. Personal guaranties can be called. Many activities could occur on the creditor side, but at the end of the day, there just isn’t enough revenue for all creditors to get paid. Debt workout serves the needs of borrowers and creditors. It’s a time for decision-making, a time for better planning and a time for resolving your credit issues.
Debt workout is not an act of failure; it’s an act of victory.
Obtaining a debt workout means being the hero and leader that you need to be while taking your tribe to the next level, where they can earn and achieve security. If a debt workout is how you get there, so be it. In the end, it supports everyone in the economy: your business, your employees, your creditors and your vendors.
For this reason, a debt workout provides a win for everyone. You get to reorganize, reduce your debt and live to play another day.
Ready to get up to bat again? Call Second Wind Consultants for a free consultation and to learn more about our debt settlement and corporate turnaround services.