What would be the best way to pay my business debt?
I am in a bind now. Work is slow, I owe my vendors money and my cash flow is in the negative. I feel like I am going bankrupt. I've been in business for six years, and all of a sudden I hit a brick wall. I need advice.
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Tough problems. Maybe you can renegotiate with your debtors to take a longer time to pay. The debtors want mainly to know they will eventually get paid. Only you can decide whether you want to string them out, and whether you'll be able to make those payments under any condition.
Here are some thoughts . . . some about how this happens to people (because we write these things to help other people too, as these answers are published).
The need for planning. This kind of problem should be managed by a planning process that gives a business advance notice and early warning. You have a plan, but more important than that, you review your plan-vs.-actual results every month, so that as sales start to fall off, you manage debt and expenses. It's about steering.
And, just to make sure we understand it, what's involved is following up and managing the plan--what I call steering--not just the plan itself. It's the process of managing the plan that helps you avoid these messes.
It's also about knowing. You don't plan just for planning's sake, but to know where you're going and be able to identify the signs early if things fall off track. Lay out your numbers, coldly and clearly, so you can see the trends. How far are your sales falling? How deep is your debt? Draw some lines and watch where they go.
The need for communications. I was in a situation like this a few years ago, and the best thing I did was keep my vendors close, with regular touches, phone, e-mail and--in one case--in person about once a week. You could also call this empathy. You need to understand that your vendors are worried too, worried about falling into the same situation, so they want as much reassurance as they can get. They want to know about your resolve.
You may need to make some tough decisions about what you can pay and how fast, and try to negotiate stretching things out with your vendors. That's a hard path to follow, but sometimes you have no choice. Hope that they'd rather have your money, eventually, than revenge.
Finally, take a deep breath: Remember it's not about blame, it's about catching things and holding things together. You made mistakes but you can't be in business without risking making mistakes. Make the changes you need to, have the conversations you need to, get help from accountant and lawyer if you need it. If there's no hope, then get out as cleanly as you can. And if there is a way back up, find it, and follow it.
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