Careful prioritisation of products and services, controlling your expenses and getting the right legal advice from the start are all great ways to avoid bankruptcy for startups.
Ways Startups Can Avoid Bankruptcy
1. Control expenses
Spending less than you earn sounds like a simple principle, but it’s easier said than done. There are a number of up front costs including fees to suppliers, premises and even production costs of new products.
Keep an eye on your expenses daily, weekly and monthly – ideally planning ahead to see what you are likely to spend. If you aren’t a numbers person, it’s worth getting someone else to look at it for you.
Keep the non-essential gatherings, events, and other related expenses to a minimum. Lastly, it’s also better to check whether the office upgrades, service subscriptions or memberships and in-house meals are essentials that add value or not (probably not).
2. Prioritize improving products or services
Ensuring the quality of products and services is also a way to avoid bankruptcy. When you provide an exceptional product or service, you can exceed the expectations of consumers, resulting in more revenue. Additionally, this will help you to stay competitive in a challenging industry.
While improving the products and services are the primary goals, understanding the current and future market trends is also essential. You can learn about what is in demand or is growing in popularity to adjust advertising, production focus, and build out a plan accordingly.
3. Repay debts
Debts are a big reason why companies go bankrupt. Due to high payment responsibilities and market struggles, founders often sell or give up their businesses to fulfill debts. Furthermore, while established companies can manage these obligations well, startups might find it challenging and overwhelming, especially in the later periods.
Instead of suffering the consequences, it’s best to prioritize paying debts, especially secured or debts with collateral. Also, clearing ones with higher interest first would help in saving money in the process. However, if it’s possible to avoid borrowing all together, then that’s always a good idea.
4. Get the right legal advice
An experienced commercial solicitor can provide your startup with the best legal advice from the start, ensuring you have the right contracts in place with partners, suppliers and customers as well as advising on how best to go about getting funding.
You may even need advice on how best to structure your startup for success.
For commercial legal advice check out Crest Legal.
5. Hire and keep excellent employees
Take care of the existing employees. If a startup has excellent employees, it can efficiently attain goals, deliverables and compete in the industry. Good employees contribute to a great culture.
If a company can’t provide high salaries to attract top-performing prospects, offering equity or stock grants with a lower wage is a compelling offer. Lastly, having an ideal environment, ethics, and perks, makes employees happy, satisfied, and excited to work daily.
Create an environment where staff care!
6. Take action quickly
Taking immediate actions to existing and possible issues and matters helps in avoiding bankruptcy. While solutions are not always quick to arrive at, having enough time to handle things allows a startup to adjust and develop plans. Also, this way, one can evade future repercussions that can affect the business. Finally, ensuring deliverables, fulfilling payables on time, and staying on track helps a startup survive, grow, and succeed.
Achieve Startup Success
Running a startup is both a challenging and rewarding process. While bankruptcy can arrive at almost any business, controlling expenses and debts, resettling contracts, making use of assets, and having an excellent workforce helps avoid it. Above all, taking immediate actions and ensuring products or services quality are both recipes for success.