When should I walk away from my self-employed business?
It takes a leap of faith to set out on your own and build your own business from scratch. While at times it may not be easy, the rewards when things are going well should outweigh these low moments.
It undoubtedly takes good judgement to run a business successfully; however it is also a skill to know when you should walk away. Although this may be a tough decision, being honest with yourself and admitting when your business simply isn’t working anymore is vital. Here are some potential warning signs that you should consider walking away for good:
- Profits are taking a tumble – When your bottom line is suffering, you need to do everything within your power to stem the loss. The first step is to look at the reasons behind this - is this because you are generating fewer sales, or is it your profit margin which has been eroded over time due to a desire to remain competitively priced? Depending on the reasons behind your decreased income, you may be able to put measures in place to rescue your business. However, it is wise to cut your losses once you know for sure that your business is beyond saving.
- The market is changing – If you are noticing less demand for your product, it is imperative to get to the root of the cause. Is your pricing the issue? Are there newer, more sophisticated products on the market which are making yours obsolete? If so, it may be possible for you to adapt, or it may be the case that your business always had a limited shelf life and it has now reached the end. The best way of ascertaining the state of the market in general is to look at your competitors; if they are experiencing similar issues then it is likely that the market has taken a downward turn; if they are thriving, then the problem probably lies with how your company is operating. Unless you can adapt to current market conditions, your business is likely to continue on a downward spiral.
- You are finding it increasingly difficult to meet your liabilities – Once your cash flow starts running low, you need to take action. Without a healthy cash flow, even the largest businesses will struggle to stay afloat. Poor cash flow is not always terminal, and it doesn’t always mean that you are spending more than you are bringing in. Perhaps your customers are paying you late, maybe you are buying and holding too much stock, have you considered whether you are over trading? Many cash flow issues can be resolved, however, for some businesses cash flow drying up is the sign to walk away.
- You have lost your passion – Although self-employment is certainly hard work at times, your drive and determination to make your business a success should allow you to navigate through these tougher times. Think back to when you first set your company up - what were the reasons behind it? What was it that you wanted to achieve? If you no longer feel the same determination, or you have lost your desire to continue, walking away is often a sensible move.
- It is affecting your mental health or home life – Running a business can be extremely stressful even when things are going well. If business takes a turn for the worse, the pressure can build and spill over to your personal life. If you feel your mental health is suffering, or the stress is taking its toll on your relationships with family and friends, this is often a huge red flag that you should be seriously considering whether your future lays outside of the company.
Just because your business hasn’t been successful in the long-run, does not mean you should give up on the idea of running a company altogether. Remember, liquidating a company does not prevent you from becoming a director in the future so you are free to start again with a new company when you choose.
If you are considering walking away from your self-employed business or limited company, you should make it a priority to speak to an expert before deciding on your next move. Call Real Business Rescue today to arrange a free no-obligation consultation with a licensed insolvency practitioner. We can help you understand your options and suggest the most appropriate next step for both you and your business. With 75 offices across the UK, you’re never far away from expert and confidential advice.