Monday, 21 October 2013

How To Rebound From Business Failure

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Last week I met a woman - let's call her Sandra — who was forced to close her printing business in July because she could no longer cover her fixed costs. She is now job hunting.

When asked if she would ever start another business, she hastily replied: "Never!".
I spent nearly an hour making the case for why her next business will likely be much more successful and that failure can be a wonderful thing — points I'm sharing with you here because failure is always a possibility in business, particularly when operating in a small, volatile and contracting economy.

Failure is one of the greatest fears of entrepreneurs, but ironically often sets the stage for later triumph.
Former chairman and CEO of global technology giant IBM, Thomas J. Watson, captured these sentiments well when he said: "Would you like me to give you a formula for success? It's quite simple, really. Double your rate of failure. You are thinking of failure as the enemy of success. But it isn't at all. You can be discouraged by failure or you can learn from it. So go ahead and make mistakes. Make all you can. Because remember that's where you'll find success."

This may surprise you, but the fastest way to rebound from failure is to quickly concede that the business has failed and move on. It's the most urgent step.
Some entrepreneurs are operating businesses on a slow but sure path to destruction, yet they refuse to throw in the towel.

This prolongs the inevitable, wastes valuable time and effort, dashes good money after bad, puts them in debt, diminishes their business confidence and causes undue stress.
In assessing whether it is time to shut down, readers can refer to my article of August 25, 2013: '5 Signs You Need to Close Your Business'.

A key step to early recovery is proper and complete closure of the unsuccessful business. There shouldn't be any loose ends, especially given the Credit Reporting Act of 2010 and new entities which now capture and report on your credit history. It's best to fulfil statutory obligations, satisfy debts or make appropriate arrangements with creditors, protect your reputation and sufficiently engage employees, customers, bankers, suppliers and other stakeholders.

Leaving debts unpaid will make doing business and accessing credit in the future very difficult.
Here's an example of how to manage customer relationships when closing: Last year when a company was going out of business it advised customers weeks in advance giving them the opportunity to redeem gift certificates and make final purchases, etc. The CEO also wrote emails to each customer thanking them for their loyalty, giving reasons for closing and promising a comeback.

This approach preserved the company and CEO's reputation and left the door open for future business.
Unfortunately, legally closing a business is very cumbersome. You must advise the Tax Administration Jamaica (TAJ), Companies Office of Jamaica (COJ) and other licensing institutions.

An authorised company official must write a letter to the COJ requesting removal from their register, which should be accompanied by an accountant's letter certifying that the company has no assets or liabilities.
All outstanding returns and documents must also be filed. If there are assets or liabilities the company must be liquidated as detailed on the COJ's website at: www.orcjamaica.com/compliance/
A tax helpline representative — 1-888-TAX HELP — advised that a closure letter must be submitted to TAJ along with your GCT certificate and certificate of closure from the COJ, if available. Companies with employees must submit final IT02, ET03 and S02 forms with payments.

A separate letter should be sent to the manager for customer service at TAJ requesting deactivation of the company's TRN. Finally, closure notices must also be sent to NIS and NHT.
With legal obligations satisfied, it's time to focus on your mindset. The most powerful step in recovering from failure is understanding and accepting that it is an occurrence, not a trait or continuous state.

There is absolutely no shame in failure. It provides opportunities to learn, innovate and grow.
Next is understanding why the business failed. This requires honest introspection and ideally guidance from a business expert or adviser. Did you have enough business training? Do enough research? Select the right location, industry or target market? Offer the right products? Have a big-enough market? Adequate funding? The right team?
Never discount the effects of business and economic environment as this can assist with managing similar risks in the future.

Learning key lessons is also essential. It's good to create a list of do's and don'ts which can reduce the likelihood of future failures. Learning from your mistakes will give you the experience and confidence to recover and start again — in your own time.

For Sandra and others in her situation, it will take time to heal and work themselves out of debt.
However, it's important to commit to continuous training, learning and skills acquisition to be in the best position to exploit the right opportunities.
One love!

Publish in the gleaner by Yaneek Page,a trainer in entrepreneurship and workforce innovation.Email: yaneek.page@gmail.comTwitter: @yaneekpagewww.theinnovatorsbootcamp.com

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