It may seem like you can’t open the news these days without reading about another big business that’s gone (or going) bankrupt – and that’s no illusion. Some of the most notable companies that have filed for bankruptcy protection in the last year include Bed, Bath & Beyond, Yellow Trucking Company, Silicon Valley Bank, Jenny Craig and Party City, just to name a few.
Commercial bankruptcies are definitely on the rise again, with more being filed by July of this year than there were in the whole of 2022. The increase is sounding alarm bells in a lot of different sectors, but many feel that the financial pinch being felt through corporate America is hardly surprising.
After all, inflation is problematic, so consumers are cutting their discretionary expenses – like party supplies and weight loss programs. Interest rates have skyrocketed in a very short time, making the cost of capital higher than it’s been in ages. Companies that spent too heavily or expanded too quickly, like Yellow Trucking, left themselves without enough cash to keep their operations running. Others are the victims of cultural shifts that are steering people toward resale shops and cheap online markets where they can buy the things they need, including home goods.
What does this mean for you and your business? It’s time to take a hard look at your own operation and see if your company is, overall, still pretty healthy – or headed toward life support. Here are the questions you need to ask:
1. What are the biggest threats to your business?
When you look at the trends in automation, innovation and consumer interest, what threats to your business do you see? You don’t want to be like Polaroid or Kodak of yesteryear, both of whom seemed to bury their corporate heads in the sand when digital cameras hit the market.
Instead of resisting change, the best thing you can do is embrace it. If you innovate, your name recognition can help your company stay on top of the market.
2. Are social or cultural shifts changing the game?
You don’t want to be like Blockbuster of yesteryear when they had the chance to buy Netflix, burying your head in the sand and hoping that the newest competitor will be a “flash in the pan” that won’t really disrupt your business model. Blockbuster vastly underestimated exactly how much consumers genuinely prefer to just have their entertainment delivered to their doors.
Be conscious of shifts in your market’s demographics and pay attention to emerging companies that could be competition. Listen to your customers’ feedback and make changes to your business goals accordingly.
Essentially, you need to determine if your market is changing and whether you have the capacity to pivot and become more competitive. If you don’t, it may be time to consider more drastic options, like looking into a Chapter 11 reorganization plan (to give you room to make necessary changes) or Chapter 7 liquidation (if you want to close shop and try something new).