This is my second post on this sub. I got some good feedback last time, so I’m hoping for some advice.
VERY long story short, my business hasn’t been making money since Covid. We are in the event industry, so though we are doing better than we were, we still never fully recovered from the world shutting down for a year.
Before Covid, we were doing amazing and had 0 debt. Now the business has over $800k in debt. We will end the year with about $1.1mil in sales and will have a net loss of about $150k all said and done.
Our brand is very well known and our social media presence is very strong.
My question is this:
Do I try to sell or do I just give up and file bankruptcy?
The main issue is, I am a single member LLC, but signed personal garenteea for the loans (I didn’t know how else to survive).
Thanks in advance for any/all feedback.
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Can you try to take on a new partner to help manage the debt if your future prospects look good? Or sell but contingent on them hiring you as the partner who still does the operations. You’ve built a team and business reputation, try to salvage it. Having you still in the mix will help with future sale if it eventuates as well.
That’s something I have thought about as well. My only concern is if I am a part of “the deal”, how would they afford to pay themselves and pay me? That’s the question I keep coming up against.
$1.1 M in sales and $150k net loss…whats causing the loss…is it primarily the carrying cost of the $800k debt?
Would the $150k result in an equal amount increase in debt?
This is a great question. The loss of sales is not including the debt. The debt is separate from the loss. We have been struggling with sales since Covid honestly and haven’t been able to catch up.
Can you clarify why you mean in your last question? Not sure I 100% understand.
Give us a breakdown of your expenses is what he’s asking, I think. If you’re bringing in $1.1M in sales, then that means your total expenses are $1.25M?
What contributes to that number? There has to be some things in there you can reduce to get back to profitability.
i don’t know. can i ask you?
If you have a good reputation, good clients and good social networks, you have tried to launch a new product, try new markets without spending money, an economic product or service with your experience can help you at this moment, review your marketing it could help you with that
In other words pivot? (a good idea).
I wouldn’t say that because you sell a lot, but I would get something that gives you cash flow to cover the debt.
If you need I can review and help you
Put it up for sale but keep the business going until it sells.
I’m curious if the business model is trending down or if the issue is within your organization. Lots of questions
With $1.1M in sales it still isn’t clear why you’re losing $150k per year. Do you have excess staff, or salaries too high? Is there an opportunity to optimize this or cut expenses to make a profit on your sales
Are the events you hold in an industry that is thriving or trending down? What’s the business / industry - there are industries like newspapers and magazines that are dying, times change.
What’s your interest payment on the debt per year? If this isn’t a profitable business, what’s it worth?
Prob. Nothing, unfortunately. Also, should consider a different biz, esp. if OP can’t sell.
Try to sell.
So, as someone that has been in a similar situation in the past - you need to get brutally honest about your options.
Looking at your post history, the business was $500k in debt less than six months ago, two months ago you were talking about a second personal property.
You have a few options.
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get an investor, it doesn’t sound like someone is going to buy the business for $800k. It’s losing $ and only has revenue of $1.1m. Purchase price is likely to be less then $500k. An investor may be willing to put ~$250k+ in for control and give you some breathing room.
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file bankruptcy, might see if you qualify for sub chapter 5. If you do file - there is a chance that some of the creditors don’t pursue you. It’s unlikely, but possible.
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call the creditors and negotiate. This doesn’t always work - but I’ve had to do it in the past.
It sounds like the most likely scenario is bankruptcy, unless you have the cash flow to continue or the assets to sell.
Don’t take on more debt and find a good business bankruptcy attorney, at least get their opinion.
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You can build your LLC’s credit file so that it’s able to apply for business loans and lines of credit without needing your personal Social Security number to guarantee it. It’s a 9-12 month process but worth it because if you decide to sell, your business is going to be a lot more attractive to potential buyers if it’s able to borrow $100,000 to $300,000 without a personal guarantee. You can sell it for more or if your business has such a recognizable brand, you can put more money into advertising or whatever else and keep it.
You need a lawyer yesterday.
Not when you decide you’re ready to file bankruptcy. Not when you find the buyer. Now.
A good one will better explain your options by looking at the debt, collateral, and what assets that are to sell. They should give some brutally honest advice based on more info than you’re willing to share here.
I’m looking for this sort of business for a friend actually. Where is it based? I can DM if you have any more info to share.
Some context on what is driving the operating loss will help us weigh in. Is it a pricey lease commitment? Wage and food cost increases? Are you booked for events but have no pricing discipline, as in are you chasing revenue?
If a good portion of the operating loss is driven by interest payments (either on commercial, SBA, EIDL, or RRF loans), then the business profitability may be different under new ownership.
Many people on this thread are confused about the difference between an asset vs stock sale.
I have a good, 2-min video on the difference here:
https://wabusinessbrokers.com/resources-videos/#buying-101
Businesses with $3M or less in revenue are transacted as asset sales 95%+ of the time.