Liquidation psychology can play a very big part, if not the biggest, in helping or hampering a business owner to have a successful business.
The single biggest factor, I find, is the decision a business owner has to make whether to liquidate or not. This is what I refer to as liquidation psychology: the state of the business owner’s mind and his/her ability to be open to the alternatives (liquidation) and that it is possible to proceed with the business after a liquidation.Disinformation available on the internet, wrong advice from so-called professionals who do not
There are too much misinformation available on the internet and also wrong advice given by so-called professionals who do not specialise in insolvencies. Lack of knowledge causes many a business owner to stay in an unhealthy business for far too long, lying away at night and not necessarily acting in the interest of the business by not liquidating.
Liquidation psychology understood
Most business owners do not want to lose their businesses, that is understandable. A catch-22 now occurs: the business starts to experience problems; the owner puts in more money (taking bigger bonds, selling assets, borrowing from family or friends or credit cards or personal loans) and more money and more money and the business becomes this big black hole that just swallows more money. The owner can’t stop because there are no other means of income. It is only possible to understand that liquidation is the best option in a situation like this before you put in more money, once you have fully consulted with us so that we can explain the liquidation process to you. Liquidation is just a method of reorganising your business so that it does not eat all your capital and nothing to fear. On the contrary, it is the one saving grace that the business owner is usually looking for, but because of the aforementioned circumstances, end up in a stalemate because of fear to move forward.
Liquidation is not a bad thing
I always say if you had my knowledge, you would not see liquidation as a bad thing and agonise over it. You will know that liquidation is one of the best tools in any business owner’s arsenal of tools to stay afloat. It is a matter of losing it all to keep it all, that is what liquidation is.
Liquidate sooner rather than later
If you wait too long and trade too long (if the business is in trouble), you can end up pushing the viability of the business over the edge. What also happens is that, if you stress too much and continuously, you implode and affect the business. Again, the liquidation psychology can bite you if you do not shift out of it. Furthermore, if you do not liquidate as soon as the business reaches and insolvent state, you are not adhering to the Companies Act and the Close Corporation Act that state that you must liquidate the entity as soon as the liabilities exceed the assets and/or the business cannot pay its debt. If you trade too long without liquidating the business, you can be seen as trading recklessly and creditors can issue summons against you in your personal capacity, even if you did not sign surety for the debt of the business. Don’t let the liquidation psychology let you implode because of fear or worry: knowledge will help you overcome this step and this is what our articles are giving you.
Liquidate as soon as the business cannot pay its debt
To sum up the foregoing long paragraph: by law, you are obliged to liquidate the business as soon as it cannot pay its debt or its liabilities exceed its assets. If you don’t, the penalty is that you can be held personally liable for the debt of the business even if you did not sign surety.
So you see, if you liquidate the entity, there is nothing to agonise about! You will be liquidating because you are complying with the law. Don’t let the liquidation psychology of fear and worry stop you from moving forward.
Trade like an entrepreneur, not an employee
Another part of liquidation psychology is the uniqueness of South Africa. We have a situation in this country of many people who are trained or honed to be employees, but, because of many reasons, people are forced to be entrepreneurs and business owners. That is great because businesses create jobs and stimulate the economy, but the problem is that most people who are business owners only run their businesses without any knowledge of the laws that affect them and still approach the running of their businesses like employees. We need to shift our entrepreneurs into the next level of knowledge and thinking, so that, when a liquidation is necessary, the business owner does not have to go through the agony of making a decision to do so.
Empower yourself with knowledge
Knowledge is everything and if all business owners were to know that a liquidation is one of the best things that you can do for your business if it has too much debt, more businesses will survive if business owners were to act timeously. Like Osho, a famous Indian guru said: For a resurrection, there has to be a crucifixion. So, for your business to survive, it must first liquidate because the liquidation will enable the new business to proceed debt free. You will also have been through your lowest financial point; you will have learned a lot and you will have more courage and self-confidence than before.The reason why I state this is because I have seen in the many, many business owners that we have helped through liquidation, that they do so much better business after a liquidation.
Mind-shift yourself to success
The mind-shift that a business owner that experiences financial problems needs to have, is to understand the business laws of South Africa and where liquidation fits in. Liquidation is a great strategy in getting rid of creditors so that the business can survive. The business will have better cash flow after a liquidation, which is usually the only reason why the business is in trouble in the first place. Once the debt is removed, the business usually survives well and because the business owner has been taught by us on how to protect the assets and the business and him/herself in the future, the business owner feels safe and therefore does better business.
Contact Nanika on 072 8558 106 to alleviate your fears and get more information as to why you should liquidate your business sooner rather than later: especially if the business owes SARS money.