People thinking about bankruptcy often view it as the culmination of a difficult time. It may seem like the end of an era. Many people file for bankruptcy after a divorce, a failed startup or a job loss. While bankruptcy can be the last chapter in one part of a story, it can also be the beginning of the next part of someone’s life. Bankruptcy doesn’t just resolve old financial obligations. It clears the way for new economic opportunities.
Someone who has recently filed for personal bankruptcy to resolve business debts may have plans to start a new organization in the near future. How can entrepreneurs bounce back from a bankruptcy with a new business plan?
Learning from what didn’t work
Every job loss or business closure is an opportunity to learn an important lesson about how companies operate or what the market demands. Internalizing the lessons provided by a previous business closure or financial challenge can help an entrepreneur create a business plan that proactively addresses certain risks. In some cases, they may even want to reference the bankruptcy in their business plan as a way of ensuring partners and investors that they have learned from their prior experience.
Building slowly for long-term sustainability
Sometimes, success or rapid expansion is what pushes a business into insolvency. The company takes too many orders at once, can’t keep up with demand, and ends up issuing refunds after suffering major reputation damage. Other times, opening too many new facilities at once can lead to overextended finances and an oversaturation of the market. Those starting a new business after bankruptcy may have limited opportunities for outside financing. They may therefore need to focus on slow and organic growth to reach a point where outside investors feel comfortable committing funds to the concept.
Maintaining clearly separate finances
Establishing a clear delineation between personal finances and business finances helps protect an individual from liability if a future concept fails. That separation can also assuage concerns about a prior personal bankruptcy filing when talking with potential partners or investors. Making the effort to separate the finances for the business and the entrepreneur starting it as soon as possible can be beneficial for the business and the person starting it.
As a closing note, those who have encountered financial or business challenges previously may benefit from legal guidance as they start developing their next business plan. The right support can help mitigate risk and potentially establish the foundation for a successful company in the future. A personal bankruptcy filing can be an opportunity to turn a field job or business endeavor into a springboard for future success.