How Do I Stay In Business?

[John Anonymous]

Hello!

I need to vent and I need some advice. Hopefully someone with REAL advice and experience can help.

I want to be very frank with you. I'm in a place where I am scared. I have been an owner of my business for about 7-8 years. Things went very well. We quickly grew and grew. We went from running out of a garage to now having a warehouse with employees. It was great. I got married, and was very happy. I had a business partner. We were 50/50 partners.

This last year, our business had some hard times. Business slowed down a lot, and put us way behind financially. Most of those pains came from losing a couple large contracts all at once. We didn't have much control of this loss. This drove my business partner into retirement this last month. I, myself, am young. I'm 28 years old. We thought with the hard times, having my business partner retire (he is older, and he wanted to retire soon anyway), I would be able to pump his portion of the pay back into the business. It might be too late. We are so far backed up, that 1 of my vendors have cut me off of some products that I need. I am working hard to fix things and get rolling.

I still have many great customers that I do business with, and I feel like my business is worth something, but I am behind. Technically, about $20k behind with some vendors. Paying them off is what I'd need to feel comfortable again to keep pushing forward. That doesn't mean I'm not in any other debt though. It's just what I need NOW.

At what point do I decide to throw in the towel? What now? What do I do?

I am afraid this business is now going to ruin my life, and it's starting to depress me. I am too young to be in this much debt, and be failing at this. I don't want it to end this way, but I am starting to feel overwhelmed!

I don't have a lot of people to talk to about this, so any recommendations, or support would be helpful.

Thank you.

[kemperk]

though I am a retail business doctor, I can help any firm.
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[lloyd]

It's always better to address these things sooner rather than later. When you were doing well would have been the time to set aside an emergency fund. If you did and you already burned through that, then good for you. Unfortunate, but good thinking.

As for now, you have to maintain your supply chain to continue earning income. Make peace with your vendors. Offer to go to COD (if they haven't put you on that already) and pay a little extra with each payment to catch up the back pay, even if it's only $100.

If you keep inventory on hand, ask if they're willing to take a return. Even if it's not for full value, you might be able to reduce some debt load that way.

At the same time, ask about vendor aid. Depending on the industry, some manufacturers are keenly interested in helping retailers create new customers. Ask if they have any co-op advertising programs, free fixtures or samples, premium items, or anything else to help you. Some of them run display contests that can earn you free products.

You might consider a short-term loan to get your vendor accounts current. SBA lenders don't like to lend operating capital, but they're willing to consider debt consolidation. Stretching those notes out for a year or two might cost some profit but generate some short-term cash flow.

You need cash. Cut all expenses to a bare minimum. Especially payroll, because you pay taxes on top of payroll. Cutting a dollar in wages might save you $1.30, depending on the size of your company. I know it stings to cut loose people who have given you their loyalty, but if you have the infrastructure of a $500,000/year company and you're only doing $300,000, you're going broke. Cut loose anybody you don't absolutely need and cut hours on the part-timers. Don't allow any overtime at all.

Concentrate on low-cost marketing & advertising, like social media. Make sure your newsletter goes out on schedule. Be consistent with it and it'll grow. Start a reddit IAmA. Start a tumblr. Create a Youtube channel offering advice for your industry.

Don't be afraid to let memberships and subscriptions lapse, like the Chamber of Commerce. You can still get in as a guest for a few visits if networking is part of your marketing plan. Also, you often get incentives to rejoin if you let it go. You'd be surprised how much a few $20/year memberships can add up to, and the expensive ones (like that CoC) can add up much more quickly.

Talk to your landlord. Tell him your trouble and ask if he'd be willing to adjust your rent rate. He might say no, but it costs nothing to ask. I've seen people save $30,000 in rent this way.

That's all I can think of for emergency measures right now. Best of luck with it.