Bouncing Back From Bankruptcy: How Businesses Can Rebuild After Filing
2020 saw some of the largest bankruptcy filings in retail. As of December 2020, almost three dozen retailers had filed - an 11-year high. For the small business landscape, the outlook looks even more grim, based on recent findings by Robin Greenwood of Harvard Business School, Benjamin Iverson of Brigham Young University's Marriott School of Business, and David Thesmar of the MIT Sloan School of Management. With such uneven waters for small businesses, it comes as no surprise that many have filed for bankruptcy in recent months. Yet, for many businesses, bankruptcy does not have to mean the end. With a great legal team for your business and robust rebuilding strategies, filing for bankruptcy can be an opportunity for business owners to reopen stronger than before.
Identify The Cause Of Your Filing
The kind of bankruptcy and reasons behind your filing matter in how you move forward. Each kind of bankruptcy filing has specific consequences. Identifying the mistakes made in the business before filing (such as poor cash management/investment choices) helps you narrow down areas that need to be overhauled. For instance, for businesses that file under Chapter 7, your entire business is sold off, and the proceeds from the assets are used to repay debts according to a prioritization schedule.
Businesses filing under Chapter 11 remain operational, while assets and debts are readjusted. This option is mostly preferred for larger businesses, since it allows restructuring of the business. The bankruptcy option your business chooses also comes with legal ramifications, which a bankruptcy attorney will discuss with you. For instance, a bankruptcy filing may mean employee redundancies, which you need to approach correctly to protect employee rights and the business brand in the process. Neglecting to do this leaves your business vulnerable to further financial and reputational damage, which hinders the chances of rebuilding.
Make Rebuilding Business Credit A Priority
When you file for bankruptcy, your business's credit score is affected. While this is common with any kind of bankruptcy filing, it can make rebuilding your business a bit more difficult - particularly when it comes to securing investments or financing post-bankruptcy. Before you can rebuild your business, you need to rebuild your business' credit.
The best way to do this is to closely monitor your credit score. Reach out to one of the three credit agencies for an updated credit report. If you have business credit cards, try to pay them off on time and in full each month to begin re-establishing a positive credit profile. Remember that bankruptcy filings can stay on file for seven to 10 years.
Focus On Keeping Your Brand Image Positive
Finally, for a business to thrive again after bankruptcy, managing its brand reputation is important. Presenting the right image, and a proactive approach to rectifying the issues behind your bankruptcy filing instills trust in your customers. A key part of this is owning up to the mistakes made and presenting your plans to make them better. Customers want to see a brand that is aware of its mistakes and wants to do better going forward.
Listening and taking on board customer feedback is also a good move. It shows that the business is prioritizing its most important assets: its customers. For some businesses, this may mean removing badly-reviewed products from their range. For others, it may be revamping its customer and after-sales service.
Bankruptcy is an issue no business wants to contend with. However, it doesn't mean the end, and if handled correctly, it is possible for businesses to bounce back stronger than ever.