Today’s post comes a brand new member of the TeamEOD writing team – please help me give a warm welcome to Maria who hails from The Money Principle! I have a lot of admiration for Maria, as she has an absolutely INCREDIBLE debt payoff story. She’ll be appearing here from time to time, and I can’t wait to read Maria’s take on saving money and debt. Take it away, Maria!
Our readers over on The Money Principle (and some others) know that slightly over four years ago we were in debt; heck we were in a lot of debt. We were in a proper financial mess worth about $160,000.
We paid it all off in three years; well, three years and a week but still this is pretty good going, I think. Naturally, the news got out; to begin with I told everyone – I published on my blog, I told my friends and I wanted to get on the top of a very tall building and shout it out.
I considered a trip to Rio so that can should from the top of the statue of Jesus Christ that we are debt free; like a mad woman. And the world should be grateful that I have vertigo: I would have been a real pain the neck if I didn’t.
When the Business Insider published our story people called me ‘stupid’ in the comments. You know why?
Because we paid our debt off and didn’t file for bankruptcy.
Now, there are many reasons to be called ‘stupid’ and I don’t believe that paying off your debt is one of them. I still believe that paying off debt not only feels good; it is also the right thing to do – under certain conditions about which I’ll tell you some other time.
There is one aspect of the situation we probably didn’t handle very well. Gosh, about this one, I can even accept to be called ‘stupid’.
Most of our debt was because of failed business: around 2008 my husband’s consultancy failed. There was nothing anyone could have done about it; large companies simply stopped letting work out; everyone was ‘tightening their belt’. As a result, a lot of micro- and small businesses went under.
It was a double whammy: no work and no finance to tide our business over.
What did we do?
As most business owners with serious problems we kept our hopes up; we didn’t give up, we kept going. You know, one contract and our troubles would have been over.
Problem is, this contract never came. And we ended up with $160,000 personal debt.
Apparently we are not unique in this: many business owners fail big time and end up in a lot of debt because they keep their failing businesses going for too long. What we should have done is to call it a day and call in the liquidators; after all, there are professional services that can help with closing a business and/or breathing new life into it.
Then again, hindsight is always correct, isn’t it?
We made the mistake of hoping that our business will recover for too long and I’m determined not to repeat it ever again.
We are building businesses again; no, not consultancy (and we’ll let you know about this when the time comes). So the question I’ve been asking myself – and researching – is the following:
What are the signs that it is time to throw in the towel?
Here are ten signs that it may be time to call it a day I could think about. These are very different and not in order of importance. If you have noticed four of these signs it is time to act; and act fast.
Here they are:
- Getting new business feels like pushing a very large stone up a very steep mountain.
- Your business is getting in debt.
- Your business’s debt to assets ratio is increasing; the situation is very serious if your debt to assets ratio is positive.
- You can’t afford to invest anything in change (new talent, new development, changing processes etc.).
- Your business is losing money.
- You wake up at 4.30 in the morning and you feel sick at the thought of the payroll.
- You’ve stopped paying yourself; not even a dime as a symbol.
- You can’t raise any more money.
- You have an ulcer, you have problem sleeping and you don’t even want to think about the future.
- Three people tell you that you look unwell in a day.
Knowing when to throw in the towel is an art form. Bankruptcy and liquidation are hard choices; these are also a part of our personal and business financial ways. People and business do go bankrupt, and liquidators can be extremely useful when your business is on its death bed.
Knowing when it is time to stop hoping and take action you need a combination of:
- knowledge and analysis;
- judgement and decision;
- decisiveness and courage; and
- reason and intuition.
Do you have any experience with business failure and how did you cope?