Hi all, I’m 31 years old and have been self employed for 7 years. The business is primarily e-commerce (automotive accessories), however we did have (2) locations - 1 in Florida and 1 in California.
The Florida office was very small and for our employees who handle sales, service, and web design. Our California location was a warehouse for inventory.
The 5 years we saw great success and were doing $500k a month in revenue (roughy $20k profit). However, 2 years ago our site got hacked, Google tanked our rankings and we have never recovered.
At that time, I had to let go of my employees, I completely wiped out my own salary, and when my leases ran up I didn’t resign them.
For the last two years, my business partner and I have worked tirelessly to get the company back on track and despite our efforts, there is no improvement.
We are averaging $60k a month in sales, which doesn’t even cover our expenses so we are slowly taking on more debt.
Which brings me to my next point.
We have $140k owed on a loan and $20k owed on a tax payment plan. This accounts for roughly $6k a month in expenses. We also have some outstanding orders that need to be submitted ($10k worth).
So current day, we are looking at roughly $170k - $175k debt.
I’m to the point that I do not think it is viable to continue operating. My mental health has been run into the ground, I’m working 100+ hours a week(I picked up a full time job to supplement my income), it has taken valuable time from me as a parent to a young child, and I have lost all priorities.
The loans we have are not eligible for bankruptcy (not that I want to go that route but my back is against the wall). Ideally, the business would generate enough to pay down the debt but I think I’m being overly optimistic.
If I cease operations, I will have to have a monthly payment plan to pay back the $175k, which would likely hinder my personal life for the next 10+ years.
Does anyone have any advice? I do not have any business line of credit. Perhaps I should obtain that and pay down as much debt as I can, then if determined I would file Chapter 7 to at least free myself personally?
Thank you,
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Im curious how you were only clearing 4% profit on 500k in sales in your beginning? Your margins for the industry you are in are astronomically low and depending on what style of automotive parts you were selling, you were selling for well under MAP pricing. You should have been clearing minimum 10-15% in profit margins for parts, more pending what sector of automotive parts.
Hate to hear about your struggles now, but honestly, it doesnt sound like you have truly ever been profitable and simply sustaining the business on new debt.
I’m very sorry to read this. I had similar situation but not so far stretched Loan position.
Many years ago I made up my mind with doing so-called “system reset”. Wind down and start over
I think best way is to sell your business to competitor and reassign debt to new owner. At least this way you may end up with positive cash balance and no debt to start over again
But man. Sending you hugs of emotional support. Remember you are not alone in this world with such situation. People figure out how to solve this
From a financial standpoint point if your revenue is gone or dwindling as you mentioned there’s no longer any reason you should be taking on more debt for the business. I’m sure you know this but I would be very harsh on absolutely any kind of spending for the business if your revenue is failing or gone.
Next, from an emotional standpoint, obviously this business is your baby and you’ve spent a lot of hard work on it clearly. But if you’re negative cash flowing every month, you need to understand the longer you keep it the harder it is going to be to recover. I don’t know your exact financials but if it is indeed failing you may want to consider liquidating absolutely everything. Inventory, equipment, desks, chairs, brand name and business itself etc and cut your losses. Your losses right now are more than just dollars, they’re taxing your mental state, and costing you time from your family. I would consider those things over the dollars.
This is going to be harsh, but if you’re consistently cash flow negative each month, you no longer have a business. It’s turned more into a hobby that is costing you money and time. If it were me (easier said than done cause I have no emotional attachment to your business) I would cut losses and try and stop the bleeding as fast as possible. This would stop my debt from growing, give me my time back for my family and take a huge stress off my shoulders, so I can then devise a financial recovery plan and an entrepreneurial plan going forward.
Good news: from a mental health standpoint, you’re super young. You got 30+ more working years ahead to build more businesses and be successful again. I think you need a short break though. If you can find any time to clear your head, take that time, you’ll be better equipped to handle this even if it’s just a day or two off.
I’m sure you’ve got a lot of emotions going on right now but be proud of yourself. You built a business up from the ground up that did 6m/yr that’s incredible. You will rebound, people like you don’t give up. Your resilience + time will be your greatest asset in your entrepreneurial life!
Entrepreneurship is a roller coaster of ups and downs and I can tell you have the work ethic that you’ll be back in no time. KEEP YOUR HEAD UP!
There’s are many better answers here. But just to drill it in.
You need to improve that margin. You cannot have a successful business on that margin. You’ll always be on the verge of death.
it might be time to file for bankrtupcy
Sell now
Im not sure what your selling but TikTok is a goldmine right now. I would start posting regularly if the products you have to sell and maybe tell your story. I’ve heard of a few people in your shoes do that on TikTok and slowly they were able to grow there business and some went viral. I wouldn’t give up, and I wish u all the best
Damn what a wild thing to happen. Did you try to get another website running and rebrand or was that lost to trying to get the original site back?
Oh man, that’s a tough situation you’re in, and I genuinely feel for you. Here are a few things you might consider:
Consult with Professionals: Firstly, it might be worth speaking to a business consultant or turnaround specialist. They might have some insights or strategies you haven’t thought of. And given the magnitude of the debt, consulting with a bankruptcy attorney (even if you hope not to go that route) might provide some clarity on your best options.
Negotiate with Creditors: Sometimes, especially if they believe the alternative is bankruptcy, creditors might be willing to negotiate a reduced balance or better terms.
Rebrand and Relaunch: Given that Google tanked your site after the hack, consider rebranding and relaunching under a new domain. This is a bit of a Hail Mary, but it could be an option.
Pivot: It’s possible that some elements of your business could be salvaged or repurposed for a different niche or market. You have experience, knowledge, and possibly some assets that might be usable in a new direction.
Self-care: Your mental health and wellbeing are paramount. Make sure you’re speaking to someone - whether it’s a therapist, counselor, or supportive friends and family. Running a business is stressful, even more so when it’s in a challenging situation.
Assess Future Revenue Streams: Before diving into further debt or bankruptcy, do an honest assessment of any potential untapped revenue streams for the business. Could you diversify the product lineup, or offer consulting, or even pivot into a related but different niche?
Finally, remember that many successful entrepreneurs have faced tremendous setbacks and even failures. It’s how you react, learn, and grow from these challenges that define the journey ahead. Whatever path you choose, wishing you strength and clarity during these trying times.
From what you wrote i don’t see your way out of this.
You can’t allocate the funds to rescue your business.
And you can’t afford whatever your business needs to be productive.
Don’t see other option than closing your shop before it’ll get worse.
Close it, make money online to get out of debt as soon as you can and start a new venture only this time implement the lessons you’ve learned.
I’ll help when I can.
Best of luck🙂