It's been a tough year for many small businesses. Economic conditions have caused some to close their doors, while others have had to make difficult decisions about layoffs and reduced hours. Regardless of the circumstances, any entrepreneur needs to prepare to shut down a business in case of financial difficulties.
If you are one of the established entrepreneurs in the industry today, we assure you that you will have a great professional career. It takes work to start and manage any business. However, shutting down a business can be challenging for you. It can be scary when you're closing a business, but with some preparation, it can go much more smoothly.
How to Close a Business?
1) Make a Plan
Before you even think about closing a business, you need to make a plan. Figure out what you need to do to finish the process and get your business closed. It includes figuring out how much money you will need and when you will need it.
Closing small businesses is a lot of work for a business owner. It will be much more difficult if you don't have everything organized. Start by creating a timeline that outlines when each step needs to be completed. It will help keep you on track and prevent delays.
Don't lose your focus on unnecessary things regarding your business plan. If something requires extra time or money, stick to the plan and take care of it as soon as possible. You will be fine if everything goes according to schedule, but if things go wrong, that could lead to nightmares.
There is no need for unnecessary complications when closing a business. Keep things as simple as possible so that everyone understands what needs to be done and there are clear understandings later on down the road.
2) Prioritize Goals
One of the most important things to do when closing a business is to evaluate and prioritize goals. It can be tough to figure out what's most important, but by doing some analysis, you can develop a plan to help you accomplish your top priorities while minimizing waste.
The first step in closing a business is figuring out how much money you're bringing in and how much money you're spending. It will give you an idea of your profits and areas that need improvement.
Once you've figured out your profits and expenses, it's time to make cuts. Try reducing costs by 20% or more to free up cash flow for further investments or expansions. Similarly, figure out which areas of the business generate the most income and focus on those areas during the closure process.
While it may not be a top priority when closing a business, preparing for taxes is still essential. Make sure all paperwork is filed on time, so everything runs smoothly down the road. And remember self-employment taxes - they can add up quickly.
It's always good to have finalized contracts and agreements before shutting down a business, so there are clear understandings. Also, ensure all staff members know their final payouts so there are no surprises regarding their payday.
3) Decide on a Closing Date
Closing a business is difficult, but making the decision as soon as possible is vital to avoid any complications. Here are a few tips to help you decide on closing a business:
Determine if you are ready to close: If you have been considering closing for some time, it may be time to take action. However, if you have only recently noticed signs of trouble, give yourself time to try and fix the situation. Do not make a premature decision because your bank or other creditors are pressuring you.
Get organized: Make sure your paperwork is in order and you have a clear idea of what will happen after the business closes. It includes setting up any tax implications and deciding what assets will become yours (and who will get them).
Talk to your employees: Many small businesses consider giving their employees notice before they close down. It allows them to plan their exit and minimize disruption for everyone involved. Be sensitive to your employees' feelings, so do not force them into anything they do not want to do.
Consider selling assets: One option is selling off parts of the business or the entire operation. It can help reduce financial obligations and free up resources to wind down operations smoothly.
Communicate with your creditors: Once you have decided to close a business, you must communicate with your creditors about why you made this decision. This approach can ensure that both parties are on the same wavelength.
4) Update Bank Accounts
Close all active bank accounts not needed to operate the business.
Transfer any remaining funds from inactive bank accounts into active accounts necessary for the business to continue operating.
Review credit card statements and outstanding balances to ensure that there is no outstanding debt that needs to be resolved before closing the business.
Obtain a current loan estimate from a local lending institution to ensure sufficient money is available to cover any outstanding debts and expenses of closing the business.
Make arrangements with the banks to have all records of transactions, account numbers, and other pertinent information transferred into their system so they can be easily monitored and managed while the business is closed down.
Complete a final balance sheet and income/expense statement for review by legal counsel or accountant before closing a business.
Pay all bills due before closing the business down for lenders or creditors who do not have any open invoices or claims against the company when it closes its doors for good.
Clear out all office space, files, furniture, etc., and prepare it for sale or lease as needed before officially shutting down business operations.
5) Collaborate With Customers and Employees
Making plans for closing a business is vital. Here are some tips to ensure that your business operations are conducted smoothly:
Make a list of the key customers and employees affected by the closure. It will help you coordinate your communication more effectively.
Send a letter or email to customers and employees informing them about the closure and offering them refunds or other compensation. Try not to include unnecessary information in the letter and keep it straightforward.
Follow up with customers and employees after they have received the letter or email, if necessary. Make sure to thank them for their support during the past few months and offer any additional assistance they may need.
Contact government agencies such as social security, health insurance, etc. to inform them of the closure so that they can update their records accordingly. It is also important to notify any debt collectors or other creditors who may be trying to contact current or former customers.
Close out any remaining accounts, bills, or paperwork related to the business. Make sure to include all pertinent information in a final document for everyone involved in closing down the company.
6) Clean Up and Prepare For Sale
When you are closing your business, you should start thinking about putting your business on sale. You must ensure that you are done with all the legal paperwork and your business material is up to date. Here are some of the key things to keep in mind while putting your business on sale:
Clean up the business: Remove any debris, broken equipment, or unused supplies if you have leased space, and clean and prepare the space for the new tenant.
Update your marketing materials: Create a new website, create a blog and post regularly about your business (including specials and new products), update social media profiles, and develop print advertising campaigns.
Prepare to go out of business: Make a list of all outstanding debts and bills payable, create a timeline of payments that need to be made, and identify any liquid assets (money in the bank, investments) that can be used to pay off debts.
Sell your assets: Depending on the value of your assets, you can sell them quickly at auction or through private negotiations with buyers interested in buying your business.
Close the business: Complete all required paperwork before closing a business (such as filing taxes), provide notice to employees, and finalize any payments owed to creditors.
7) Make Sure All Supplies Are Obtained and Accounted For
When you close a business, you pull the plug on just about everything related to your business plans, such as the supplies and bank accounts. Here are some of the notable points to consider while shutting down your business:
Obtain all necessary supplies and account for them in a safe place.
Ensure all employees are advised of the closure and given the appropriate time off.
Prepare any legal agreements or documents that may be required, such as an inventory list or sales records.
Remove all signage and promotional material from the business premises.
Close out any bank accounts and credit cards associated with the business.
Arrange for any tax filings that may be necessary, such as income taxes or GST/HST returns.
Clean and tidy up the business premises as best you can before closing down for good.
Write a final thank you letter to your customers and staff, acknowledging their support while closing a business.
8) Sell Assets and Close Out Finances
When it comes time to closing a business, you must prioritize your assets and close out finances immediately. Here is a checklist of what you should do to ensure a smooth closure:
Make a list of all the assets and liabilities of the business. It will help you determine which items need to be sold and in what order.
Put together an inventory of all the equipment, furniture, and other possessions owned by the business. Make sure to list the estimated value of each item.
Determine how much money is currently owed by customers and suppliers. This information will help you decide which payments must be made before closing the shop.
Sell any excess inventory that isn't needed by the business anymore. It will generate extra cash flow that can be used during the closing process.
Calculate how much money needs to be saved to cover all outstanding debts and expenses. This number will give you an idea of how long it will take to close the shop properly.
Hold final meetings with clients, employees, and suppliers impacted when you shut down a business. Make sure everyone knows when and where these meetings are taking place so they can attend without interruption.
9) Take the Positives and Move Forward
Start planning as early as possible, so you have plenty of time to organize everything and ensure all the proper paperwork is done. Take stock of your business and work on improving any weaknesses that may need improvement. Stay positive and remember why you started this business in the first place since staying motivated during these challenging times is essential. Make sure you thank your customers, partners, staff, and other supporters for their support throughout the year. Putting this chapter of your life behind you will mean a lot.
Build a Business Website on Strikingly
Image taken from Strikingly
Even after you have decided to close a business, you wouldn't want to lower your productivity levels and give your all before throwing in the towel. If you are ready to close a business, consider some alternative options and look to transform it into an online business. Once you complete the registration on our platform, you will become part of our free plan, which allows you to build a basic business website with all the essential features. We provide our users with easy-to-use and responsive website templates which can be customized according to any business plan. Here is how Strikingly can play a role in closing a business:
Image taken from Strikingly
Convert your business to online: Many businesses start from physical stores to attract people from the same city or colony. If you feel that you're not generating enough revenue through this approach, you can inform your audience that you are closing your business. However, the best approach is to stick to your business idea and convert it into an online business. You can rely on Strikingly to build a professional website, which will generate more leads and revenue than a physical store. After building your website, you can inform the audience about your business background and mention your motives about converting it to online business.
Social media platforms: You can use social media platforms to help you with this as you will have an ideal customer base before your business transformation.
Closing a business can be an emotionally challenging experience. Still, it is essential to remember that it is an opportunity to reflect on your successes and failures and take the necessary steps to ensure your business acquires everything it needs. Following our checklist will help you create a plan for closing your business smoothly and efficiently.
Starting a business is a difficult task for any entrepreneur. However, closing a business you have worked extremely hard for is also tricky. Although there are many ways to salvage your masterpiece, there comes a situation when you have to shut down a business.
Closing a business does not necessarily mean you have failed as a business owner. Sometimes circumstances, like the COVID-19 pandemic, will drive you out, regardless of how hard you try. You did amazing things, and that doesn't go away just because you close a business. You can always convert your plans to an online business or start a new adventure with Strikingly.