How to Write a Business Plan

190 | HOW TO WRITE A BUSINESS PLAN

Sally’s Book Shop: Balance Sheet

Assets

Cash $ 200

Inventory at cost 32,000

Fixtures and equipment at

estimated sales price 5,000

Total Assets $ 37,200

Liabilities

Accounts payable $ 15,000

Income taxes and withholding

payable 1,000

Total Liabilities $ 16,000

Close the Business and Negotiate
With Your Creditors

If you’re losing money every month and
don’t think your cash fl ow will improve
soon, you can close your doors and
make deals with your suppliers and other
creditors. You can often negotiate to pay
much less than what you owe. You can
offer them a small lump sum payment or
you can offer to make monthly payments.
Either choice can be a good option if
you have the money or income to make
payments.

Hold a Going Out of Business Sale

This usually involves selling all your
merchandise at or below cost. It frequently
makes sense for retailers, because

inventory of goods for resale is usually the

retailer’s largest asset. There are fi rms that

make a business of liquidating businesses,

or you can do it yourself. A liquidation

sale can sometimes be a better idea than

selling a business. Take Sally’s bookshop,

for example. If she could sell her assets at

cost, she could pay all her creditors and

end up  with    $21,000 in  cash.   Even    if  she 

only got 45¢ on the dollar, she would come

out clean. Auctioneers and liquidators

have lots of tricks to get the best prices for

everything. It’s worth investigating if you’re

thinking about a sale, especially if you

have a lot of inventory.

Declare Bankruptcy

Federal bankruptcy laws are designed

to help debt-burdened individuals

and businesses get a fresh start. You

declare bankruptcy by fi ling papers in

a bankruptcy court. Your creditors are

immediately barred from trying to collect

what you owe them. So, at least tempo-

rarily, creditors, even the IRS, cannot

legally empty your bank account, repossess

your property, or cut off your utility

services. However, with court approval,

certain creditors may be entitled to

repossess your property or resume their

collection efforts.

If you own your business as a sole

proprietor, you’ll need to declare personal

bankruptcy. Your personal debts as well as

your business debts can be discharged—

that is, wiped out—through the bank-

ruptcy process.