Closing your business checklist
Every evening you lay your head on the pillow but can’t sleep. Your head won’t stop racing.
Should I close my business? Should I move the assets and move on? What about my staff? What about what I’ve worked for? But I’m not getting any work/life balance. I’m not making much profit. I want to do something else. But I’ve worked so hard.
The decision to close a business carries a lot of emotion. By now you’re probably feeling overwhelmed and possibly burnt out.
Simona Hughes, financial counsellor with Financial Utilities, which is affiliated with Carbon Group, says you need to make sure that closing your business is actually the right decision.
She says a lot of people give up before they’ve really dug deep and understood the mechanics of business. So, let’s take the emotion away and look logically at things:
- Your business model: Is your model broken and not profitable? If so, how can you tweak that model to make it more profitable?
- Saleability: Are parts of your business saleable or can it be tweaked to be saleable?
- Merge: Can your business be merged with another to make it something great again?
- Lifestyle: Does your business still suit your lifestyle? Can it be tweaked to better suit your lifestyle and values? Can you hire staff to do the work instead of you, so that you’re still making money but you’re not actually working in it?
- Reach out: If you’re having doubts about your business, open up and talk about it. Talk to your financial advisor, your accountant or business mentors. Talk to others who have been in business a while. Ask for help in finding others to discuss it with.
- A seasoned entrepreneur: Learn from the experience of people who have bought, sold, or even scaled businesses. Get help to find a seasoned entrepreneur because they will pretty quickly help you work out if it’s worth keeping or closing, and what needs to be done.
You’ve done the above and decided to definitely close your business. But now, there seems a million things to do.
Here’s a checklist to help get you started:
- Pipeline: What is your pipeline of product or service sales. From this, work out a timeline and potential closing date. What do you need to keep going until that time so you can fulfil promises?
- Legal advice: Get help to work out what you need to do for your industry. CCI’s Workplace Relations team can help. What are the requirements for suppliers, staff and customers? You may have retention obligations. For example, if you’re in the construction industry you need to look at your warrantee and obligation contracts. You also need to keep insurances active for a number of years to cover the contracts that you’ve entered into.
- HR: Find a HR consultant. The CCIWA team can help you in these areas.
- Financial projections: Have the financial projections to survive until you close. Do not trade while insolvent, the penalties will haunt you.
- Project manage: Closing a business is like a project. Treat it as such.
- Staff: Communicate your plan. Set an end date or if you don’t exactly know the date, at least have a transition and a plan and communicate that. Hughes says it would be worthwhile just saying “look, within the next nine to 12 months, this is what we plan to do, it might be another 12 months after that when everything’s finalised and we fully close down”. You might have to make people redundant and that could take months. But you might also need employees to stick around until you completely close. You don’t want to damage existing work and existing services. Do you need to offer redundancies? do you need to incentivise some staff to stay on until closing? Do you need to help train them for life after your business? Small businesses (less than 13 staff) don’t have the same legal obligations as bigger business. What are yours?
- Suppliers: You need to let them know.
- Ending your lease agreements: You need a plan A, plan B and plan C. If you’re breaking a commercial lease what will your financial commitment be if you can’t get replacement tenants? How much will it cost to repair the premises before you hand it over. Allow for some legal costs in case it gets nasty.
- Sell business assets: Recoup what you can
- Pay outstanding bills: If finances are tight, put a plan in place and don’t ignore you creditors.
- Tax and Business matters: You must close off tax in the final year.
- Keep your business records intact: You need your records for five to seven years, so where will you put that information? Who will be responsible for it?
- Delegate: Give different people different responsibilities to make sure everything is ticked off and dealt with.