How to Avoid a Bankruptcy from a Business Owner Who Didn’t

In my family of entrepreneurs, I have committed the ultimate business atrocity.

It wasn’t for my lack of mentors.

I remember hearing stories from my grandfather who, after coming to the United States from Poland, built a lumber business. When he didn’t know what to do with the extra lumber, he became resourceful and began making cabinets. Repeatedly, he found ways to use all his resources to excel in the world of business.

My Step-dad Had the Same Knack

He was in the real estate business and doing quite well. There was a point, however, when he started becoming concerned with a potential housing crash. In response to that possibility, he decided to balance his business by including a rental and property management company.

Even my cousin, Erik, who owns a scuba diving charter in Maui, successfully bolstered his business by also taking people on ecological tours. In the process, he became an amazing underwater photographer.

Each of these men learned how to build a solid business and then expand that business into other areas.

As a Small Business Owner, You Hear It All the Time

“Don’t put all your eggs in one basket. Build the foundation and diversify your offerings, your portfolio, and your revenue streams.”

Being a spiritual seeker, I have noticed how easy it can be to jump from spiritual tradition to spiritual tradition, looking externally for just the right fit.

I remember one day Mark telling me that although all streams lead to the ocean, it’s impossible to reach it if you keep jumping streams.

Yet, a Few Years Ago, That’s Just What I Went Ahead and Did

At the time I had a pretty successful coaching business with over 1000 subscribers on my ezine list and a constant flow of new clients who were getting measurable results.

Then my life suddenly changed. My wife and I divorced, and I became a half-time single parent. Because this family shift was so current for me, I wanted to introduce parenting issues into my coaching.

Instead of branching off and addressing the parenting issues of small business owners and building from my solid foundation, I jumped streams and attempted to build a completely new clientele teaching compassionate communication for parents and kids. For reasons I can’t now remember, I didn’t think that business people would be interested.

Big Mistake

With no safety net, little savings, and hardly any revenue, I passionately took flight only to end up smacking into the sidewalk of Bankruptcy.

Now the good news is bankruptcy is not the end of the world, and I’ll be writing future posts on how to survive it and even thrive after it; however on this post, I’d like to share a few steps on how to avoid it.

Keys to Avoiding Bankruptcy as a Struggling Business Owner

• Don’t leverage a solid foundation without a transitional plan. If you have a current successful business, see if there is a way to branch off into a new area of that same business. If you have a full-time job, see if you can go down to part-time before you branch out.

• Take an honest inventory of your money situation and be prepared for the unexpected. I have a past client who is a mortgage lender. He had six months salary in reserve so that when the mortgage crisis hit, he was able to wait. Now that interests rates have dropped, he has more business than he can handle.

• Creating a business on credit only is like playing Russian roulette. There is a point of no return where interest rates begin to climb faster than you can pay debt off. Know your limits before you start borrowing and create an exit strategy if your credit hole is getting too deep.

Bankruptcy is becoming more and more common around the globe. I’m curious to know what your thoughts are as a small business owner about avoiding or surviving bankruptcy?