Small Business Bankruptcy | Avoidance at Startup is the Best Medicine

“However, the economics of our business continued to deteriorate. We barely escaped bankruptcy a year ago, and in the aftermath of that escape we had to make some even tougher decisions.” ~Gerard Arpey, elected Chairman of AMR Corporation and American Airlines, Inc.

The news of the financial meltdown of AIG (American International Group, Inc.) is not shocking to like to some because I get to see small business bankruptcy taking place from time to time. They are here today; they are gone tomorrow. Certainly, stability and organizational size today, in a highly volatile and competitive business market, is not an assurance that an organization will last for long. However, business bankruptcy can be avoided.

For a seasoned businessman or entrepreneur, filing for bankruptcy is the last resort. Although, this is always a better alternative than going to prison. It is something that you hope that you have not to deal with. The best medicine to this is avoidance at the outset. What I mean is like a newborn baby getting an immunity inoculation against certain types of disease.

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The easiest way to ruin your business at the outset is through bad credit loans. In fact, running into a huge loan at the beginning is tantamount to closing shop or filing a business bankruptcy even before you started. So, how do you avoid this undesirable scenario? Here are a few tips you might want to consider:

• Don’t start a small business with a loan. Why? You would easily lose steam running a startup business to pay a loan.


• Get help from a reliable and credible financial expert. Running a business and managing your finances are two different activities, although the latter is part of the former activity. The counsels of the experts in this area are invaluable. Seek, and use them to your advantage. Besides, with a financial aid at your side, you can better manage your business to profitability.


• Use the Pareto economic principle of investment. Meaning, invest your money on 20% aspect of your business that will yield 80% of your revenue and profits. This principle holds true regardless of any economic condition. (Good Article on Pareto Principle here after the jump.)

Again, let me reiterate; small business bankruptcy can be avoided. Good business planning is definitely invaluable, thus spend more time and efforts on this before you launch your business.