BusinessWise with yaneek Page
QUESTION: I own a clothing and accessory store for women in May Pen. Business has taken a turn for the worse and is really struggling. This is the worst I have ever seen in my years in business. The shop is not earning enough money to cover expenses since the start of the year, and I have used up all my savings paying bills. I am now down to one employee. It is so bad that I have to be borrowing from family to pay the rent and utilities. Because sales are so slow, I cannot restock with the latest styles as fast as before. The devaluing of the dollar is another problem because it costs more to buy and clear my goods. By the time I price them, customer complain they are too expensive. I am honestly afraid of losing everything. I am so stressed and depressed. Please give me your best advice to get out of this mess. I don't know what else to do. Thank you.
- Store Owner
BUSINESSWISE: I have immense respect for people who choose to start a business in Jamaica. It requires a tremendous amount of courage, effort, time and financial outlay that is not for the faint of heart.
It's even more taxing when you've given birth to a business, selflessly nurtured it for years, battled in a difficult business environment, and are ultimately rewarded with failure, debt and heartache.
I understand and feel your pain because I have been there before. Unfortunately, you are now at the point where you must close the business. Borrowing to keep the business open is only delaying the inevitable and will put you further in debt.
Debt is a major concern because our outdated bankruptcy law offers minuscule protection for your personal assets, including your home, car, and furniture, etc, particularly if you have registered as a sole trader rather than a company.
You could even face jail time for failing to honour your debts and be disqualified from professions such as real estate, finance and law if you are declared a bankrupt.
Follow this link - moj.gov.jm/sites/default/files/laws/The Bankruptcy Act.pdf - to view the Bankruptcy Act.
It's never an easy call, but here are some key signs that it's time to close your business:
1. Your revenues do not cover your fixed costs on a monthly basis:
Fixed costs are business expenses that are not related to sales, such as utilities, salaries and rent. They are the expenses that must be met whether you've made sales or not. If you can't cover these for a sustained period it is time consider closure.
2. Your business is no longer profitable and you are consistently racking up losses:
One of the primary goals of a business is to make a profit. This is because profitability is essential for expansion, sustainability, and long-term success.
Some businesses can make losses and still operate, as we see often in Jamaica, particularly if they have strong cash flows and opportunities for growth/turnaround. Regrettably, this is not the case for you.
3. You are not able to ride out the recession:
Jamaica's economy continues to be in steep decline with projections of negative to limited growth in the short to medium term. You are already operating in one of Jamaica's poorest parishes according to the 2010 Survey of Living Conditions.
Also, with reduced government spending, increased taxes, and civil servants' extended wage freeze, things may get a lot worse for some businesses before it gets better.
Since you have exhausted your reserves, are already in debt, and have no cash flow to keep the business going, it is unlikely you can ride out the recession.
4. There are no opportunities for growth:
Amid rising unemployment and concerns about the economy, people will cut back on spending on clothes and focus mainly on necessities. Since all your goods are imported, you are vulnerable to foreign-exchange rate risk, which complicates buying and pricing your goods.
5. You are battle weary:
If a business is wreaking havoc on your health or your interest has diminished, it is time to move on. Business demands a high level of energy, focus and drive in order to compete effectively, without these the likelihood of failure increases.
Note that in closing the business you must safeguard your reputation, maintain goodwill with customers, and satisfy certain legal obligations.
Keep the faith and rest assured that failure is not fatal - it can be a constructive prerequisite for later success.
Yaneek Page is a trainer in entrepreneurship and workforce innovation.Email: email@example.comTwitter: @yaneekpagewww.theinnovatorsbootcamp.com