Their sales have been seriously down for months. They have not reduced their operating costs in the same proportion and, in their desire to maintain a certain structure for better times, they have increased their debt significantly.
It doesn’t matter the turn, or how competitive your operation was at a certain point in time. If your business falls into that description, and if the market in which you participate is also being seriously transformed with new models that are not natural to you, your company is mortally wounded.
Turning this gloomy scenario around is the priority of owners and managers. Regaining structural competitiveness should be the mission of every employee. However, few speak of the elephant in the room. What would have to happen for us to decide to close rather than continue?
There are multiple arguments that can be developed to support the organized closure of a business that is no longer a business, but what triggers must be clear to travel on that route? Here 3 for reflection:
1) Debts at a level whose repayment nullifies your profitability indefinitely. – Even if your suppliers continue to offer you commercial credit or the banks keep the current credit lines alive. Even when your assets back your liabilities and you have serious refinancing offers, the company must be clear about how much and even when it wants to mortgage its future.
The resizing or reconfiguration of a business becomes less complex in its fight against internal and external interests constituted when its managers are clear about the limit of their tolerance to the indefinite deterioration of their financial balance.
2) Extreme legal risks that affect the essential assets of the partners. – There is a difference between keeping the risk of partial or total loss of the business assets at the limit and maintaining or increasing the risk of loss of the essential personal assets of the partners.
Owning implies being the guarantor of a broad and complex set of direct and indirect responsibilities that it is preferable to make visible when the business is mortally wounded in order to explicitly define risk lines that are not wanted or should not be crossed.
3) Decisions that mean violating essential values. – Just as in healthy stages of companies growth should not be supported by questionable or openly illegal acts, in moments of structural pain the ways in which the business is to be saved must be kept clear.
Recalibrating and reconverting it implies a good dose of pain in the process, but it also implies deciding the ethical references under which you want to implement what is necessary. Deception, cheating, and fraud tend to appear in moments of risk of survival, only avoided by those who believe that it is the means that build the end and not the other way around.
The operational inertia of losing organizations destroys value in a hyper-accelerated way. The ultimate wish for survival of all staff inhibits the discussion of points of no return. And the owners’ refusal to face a failure scenario postpones painful decisions.
Very few corporations (large and small) and a few groups of partners (prosperous or with narrow economies) have perfect clarity of the lines that are not going to cross and of the triggers that, in their respective reality, would detonate an orderly process of closing the company. company or one of its business units.
Businesses are born from the courage of their owners and managers at specific market moments. Well, with equivalent arrests, these protagonists must know how to decide how far they can go and when it is time to put an orderly end point.
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