3 Signs Your Small Business May Be Headed For Bankruptcy

14 December 2019
 Categories: Finance & Money, Blog

No small business owner ever wants to believe that they will have to file bankruptcy. Unfortunately, financial woes can come for business owners just the same as they can come for individuals. It is best if you can foresee bankruptcy in the near future so you can plan appropriately and start discussing your situation with a commercial bankruptcy attorney. Take a look at some of the situations when a small business may be headed for bankruptcy. 

There is a major decline in the demand for your products or services. 

You may have started out with products and services that are in high demand, but suddenly, things take a turn and it seems very few people are interested in what you have to sell. If you have overhead costs to operate your business, such as paying employees and paying utilities, it can get really hard to stay afloat financially. If things do not turn around quickly, you may have to consider filing bankruptcy. 

The expenses your business faces are overwhelming your profits. 

It may not be something that you start out anticipating, but one of the most common reasons a small business has to file bankruptcy is if their expenses overwhelm the profit margin by such a degree that it is no longer feasible to continue the same way. This kind of situation can happen if: 

  • There is a sharp increase in the costs of materials or supplies 
  • You do not have your product or service prices appropriately for your costs 
  • A major change occurs that causes you to pay out more in operational costs 
  • An economic or government regulation change forces you to raise employee wages 

You've lost a massive amount of funding due to liability lawsuits. 

It is important to carry liability insurance as a business owner, but this is something that many small business owners fail to do in an adequate way in a lot of cases. It only takes one situation that you can be held liable for to drain almost all of the positive funds you have for your small business. If you are facing a huge lawsuit and you know that your business may not be able to continue once settlements are paid, it is best to start looking at the bankruptcy solutions that could be available. While filing bankruptcy will not save you from having to pay for settlements, it can help you save your business.