Question: I invested essentially all of my savings and available cash into starting a business after being laid off from my corporate job.  Now, over a year later I have made no income and the $20,000 in business debt and other personal debt are causing me real problems.  I cannot meet my bills.  The business was touted as “fool-proof” but it has been exceedingly difficult to generate business income.  It is unprofitable.  What should I do?  Signed, Schirall.

Our response:  It’s time for a reality check.  Now that you have almost two years of experience with this business, you need to carefully analyze if and when it will every reach cash flow break-even or profitability.  Please consider:

1. Revise your business plan to reflect the current situation.  Include only actual customers or those that are highly likely to convert (that means that they are in the latest stages of the sales process) in your sales projections.  Be careful of making it look like a hockey-stick with accelerated growth just a short time in the future.  It rarely works like that.
2. As soon as possible run, don’t walk, with you business plan and business history to the nearest Small Business Administration office and make an appointment to meet with a SCORE advisor for the express purpose of reviewing your plan.  The SBA office and the Service Corp of Retired Executives (SCORE) can be located at www.sba.gov.  This is all provided at no cost.
3. Ask your SCORE advisor for an objective analysis of the prospects for your business.  They can also advise you on possible courses of action.
4. Do the same thing with the SBDC (Small Business Development Center) nearest you.  You will find them at http://www.sba.gov/sbdc/.  Most of their services are free.
5. Steps 1 through 4 will put you face to face with business professionals.  That’s where you need to be to cut through the emotional attachments that you have made to your business decisions to date.  You need objectivity that you can only get from uninvolved parties.
6. Consider what these experts have to say.  Your options will probably include the following:
   1. Shut it down and cut your losses.  Call the experience an education.
   2. Continue the business part-time with a lower cash burn rate by cutting all non-essential expenses (non-income producing) to the bone.  For example, if you don’t meet clients in your office, you probably don’t need to rent an office.  Go virtual.
   3. Put the business on hold until you can make adjustments to the business plan to make it work.
   4. Modify the business plan so that your chances of success are higher.
7. Take a look at our materials and books on profit improvement and cost reduction on this site.  They may assist you in your drive to profitability.

Starting a business is very difficult and all too many run out of working capital before they can be built to a self-sustaining level.  Starting small, part-time is often a practical way of testing a business concept before “betting the ranch.”  Take any business opportunity pitches with a grain (maybe a bag) of salt.  Understand that the promoter’s primary motivation may be to sell you and not so much to worry about your later success.  Even the best of franchises are not 100% successful everywhere.

Please remember that you have free will and the suggestions provided here are only for consideration.  Consult with legal and licensed professionals as appropriate and make your own decisions.

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