Hi all, I’m 31 years old and have been self employed for 7 years. The business is primarily e-commerce (automotive accessories), however we did have (2) locations - 1 in Florida and 1 in California.
The Florida office was very small and for our employees who handle sales, service, and web design. Our California location was a warehouse for inventory.
The 5 years we saw great success and were doing $500k a month in revenue (roughy $20k profit). However, 2 years ago our site got hacked, Google tanked our rankings and we have never recovered.
At that time, I had to let go of my employees, I completely wiped out my own salary, and when my leases ran up I didn’t resign them.
For the last two years, my business partner and I have worked tirelessly to get the company back on track and despite our efforts, there is no improvement.
We are averaging $60k a month in sales, which doesn’t even cover our expenses so we are slowly taking on more debt.
Which brings me to my next point.
We have $140k owed on a loan and $20k owed on a tax payment plan. This accounts for roughly $6k a month in expenses. We also have some outstanding orders that need to be submitted ($10k worth).
So current day, we are looking at roughly $170k - $175k debt.
I’m to the point that I do not think it is viable to continue operating. My mental health has been run into the ground, I’m working 100+ hours a week(I picked up a full time job to supplement my income), it has taken valuable time from me as a parent to a young child, and I have lost all priorities.
The loans we have are not eligible for bankruptcy (not that I want to go that route but my back is against the wall). Ideally, the business would generate enough to pay down the debt but I think I’m being overly optimistic.
If I cease operations, I will have to have a monthly payment plan to pay back the $175k, which would likely hinder my personal life for the next 10+ years.
Does anyone have any advice? I do not have any business line of credit. Perhaps I should obtain that and pay down as much debt as I can, then if determined I would file Chapter 7 to at least free myself personally?
Thank you,
From a financial standpoint point if your revenue is gone or dwindling as you mentioned there’s no longer any reason you should be taking on more debt for the business. I’m sure you know this but I would be very harsh on absolutely any kind of spending for the business if your revenue is failing or gone.
Next, from an emotional standpoint, obviously this business is your baby and you’ve spent a lot of hard work on it clearly. But if you’re negative cash flowing every month, you need to understand the longer you keep it the harder it is going to be to recover. I don’t know your exact financials but if it is indeed failing you may want to consider liquidating absolutely everything. Inventory, equipment, desks, chairs, brand name and business itself etc and cut your losses. Your losses right now are more than just dollars, they’re taxing your mental state, and costing you time from your family. I would consider those things over the dollars.
This is going to be harsh, but if you’re consistently cash flow negative each month, you no longer have a business. It’s turned more into a hobby that is costing you money and time. If it were me (easier said than done cause I have no emotional attachment to your business) I would cut losses and try and stop the bleeding as fast as possible. This would stop my debt from growing, give me my time back for my family and take a huge stress off my shoulders, so I can then devise a financial recovery plan and an entrepreneurial plan going forward.
Good news: from a mental health standpoint, you’re super young. You got 30+ more working years ahead to build more businesses and be successful again. I think you need a short break though. If you can find any time to clear your head, take that time, you’ll be better equipped to handle this even if it’s just a day or two off.
I’m sure you’ve got a lot of emotions going on right now but be proud of yourself. You built a business up from the ground up that did 6m/yr that’s incredible. You will rebound, people like you don’t give up. Your resilience + time will be your greatest asset in your entrepreneurial life!
Entrepreneurship is a roller coaster of ups and downs and I can tell you have the work ethic that you’ll be back in no time. KEEP YOUR HEAD UP!