“My Small Business Is Killing Me…”
One of the saddest things I have ever heard in my law practice is a client who told me that they were using their Social Security checks to pay their employees! The business was not earning enough money to pay its bills.
Each month they were going further into business debt, missing mortgage payments, life and health insurance cancellations, unpaid taxes, termination of electrical and phone service at home all in an effort to keep a long running business going.
This was the absolute definition of insanity.
Instead of just closing the doors or turning the business over to some else to run they were losing money every month to keep the hope alive that business would turn around.
These were good, honest hardworking people, but they could not make the decision to close the doors on a business that was no longer a business but a liability. The decision was emotionally devastating.
This is not the exception. Long run family businesses often fall into this paralysis.
Soon enough, in their situation, they faced an involuntary (i.e. forced) decision. They got sued and no longer could hide or avoid the harsh truth. The business (as they once knew it) was dead.
Looking back now, the lawsuit was a favor, it accelerated a process that was going to be made for them one way or another, but more importantly, before they incurred more debt and digging a deeper financial hole.
How could such a thing happen?
Easy. Ask any self employed person whether this is possible and if they answer you honestly, they will tell you that one of the hardest things about closing a business (especially a long running business) is voluntarily calling in quits.
Why else would someone go into business for themselves? Independence, pride of ownership, building a legacy, reaping the rewards of hard work and the freedom of being your own boss allows. Next to homeownership, owning your own business is part of the fabric of America.
But when a business ceases to pay its bills and provide its owner with compensation above minimum wage (after taxes), sometimes the last one to realize this seems to be the independent self employed person.
Nowhere on earth will you find individuals who agree to voluntarily work 12 to 18 hours a day for free while going further into debt than the self employed person who can not and will not come to grips with the financial reality of a failing business.
When they do realize the situation and let go, it’s like they have been released from prison.
One client who ran a transportation company walked away from a family run business slaving away16 hour days for years and took a job in which he was over qualified. During his entire working life he never received a regular paycheck, a lunch hour break, days off and paid vacation. The job paid less than what he could have made in a “good year” in business but he had not had such a “year” in a long time.
After taking the job, he was a different man – happier, enjoying his wife and small children, living life and planning a vacation. He had a huge adjustment – when he first started his new job, he was working “too hard” and making all of the senior people in his department look bad because he was getting his work done in half the amount of time. It wasn’t really a hard adjustment he just followed the example of his co-workers – now he fits right in.
In the Central Valley, I see a lot of farmers and farm related businesses conducting themselves in exactly the same way. They have an independent streak a mile wide. Their businesses are tied to the land, family and heritage.
Other business owners are the same way. They pour their heart and soul into a business stamped with their blood, sweat and tears, but the tide changes, sales dry up, clients and client development disappear, more competition, an unexpected down turn in the economy, loss of production, loss of a key employee to sickness or death. You name it. These triggering events can and do regularly bring small (and large) business to an end or serious financial distress.
Closing a business is difficult. For anyone never having run a business, it’s not just about profits, but about clients, employees, friends and family that make up the core of any business.
The decision to close is difficult and emotional, but with all decisions that fall into this category they eventually get made – either by you or someone else.
Similar to debt, a business that consistently loses money is a prison with only one key – close the doors and walk away – and once that decision is made, the gates of the self imposed prison are flung wide open.
Disclaimer
Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.
Tags: employees, lawsuit, mortgage payments, unpaid taxes