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Is closing your business the right choice?
There are many reasons to consider shutting your business. Explore the alternatives, from selling up to finding ways to turn around your finances.
Before making the big decision to close, talk to an advisor about:
- your finances, including any debts to repay
- alternatives to closing down.
Focus on finances
The first step is to 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.
Money troubles
If this is your reason for thinking about closing down, the best thing to do is take action. Ignoring problems won’t make them go away.
The amount owed can determine your next steps, including:
- Rejigging 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 you who owe money to, eg suppliers, lenders, Inland Revenue).
- Combining your debts: Juggling 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.
Business debt(external link) — New Zealand Insolvency and Trustee Service
If you owe money, eg loans, unpaid bills or tax, ask about a manageable plan.
Get advice
Your next step is to get sound advice from a financial professional, eg 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 identify alternatives to closing down and help you get ready for the next step, eg 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.
The best way out of debt is to pay it off — even bit by bit will help.
Owe money? Talk to your creditors
Creditors are people or organisations you owe money to, eg suppliers, lenders, 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 sympathetic 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 bury your head in the sand and 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, eg paying in instalments.
Contact us(external link) — Inland Revenue
Don’t ignore your debts. Talk to an advisor about manageable ways to repay what you owe.
This will help your finances and your stress levels.
Look at all the options
It’s important to take your time to think through the options and get good advice.
Ask yourself:
- Do I still have the passion for my business to make it work?
- What am I prepared to risk?
- Will my creditors and any investors back me to succeed?
- Can the business turn around?
Make sure you assess all your options. These might include:
- Selling your business: When setting a sale price, make sure you take all your assets into account, including intellectual property. And 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.
