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For small business owners, bankruptcy can feel like an obscenity to say out loud. When you read about big corporations going bankrupt in the news or hear entrepreneur friends share that their small businesses filed for bankruptcy, it sounds like they’ve reached a tragic end.

The truth is that bankruptcy doesn’t mean you’ll never work again—it doesn’t even mean that your business has to shutter for good. While the bankruptcy process for small businesses can be traumatic, expensive, and financially damaging, there are ways to mitigate the stress of bankruptcy as well as methods to protect your business and your assets during the process.

Knowing the different options available for small businesses considering bankruptcy is the first step. Before you contact a lawyer or your creditors, think about which type of bankruptcy might fit your situation best.  

What Is Bankruptcy?

Bankruptcy is a legal proceeding decided in federal court involving an individual or company that is unable to repay outstanding debts. Typically, the process begins with a filing on behalf of the debtors, although occasionally debtors can begin the process with the court. During the process, the court takes into account the debtor’s assets. Depending on the type of bankruptcy, the types of debt involved, and the business’s structure, the court may decide that the assets are used to repay debts.

It’s common knowledge among entrepreneurs that most small businesses fail: Bureau of Labor data shows that about 50% of small businesses close within 5 years of opening. However, not every business that closes files for bankruptcy. Most companies that consider bankruptcy are having issues with repaying debt.

Still, small business bankruptcies happen all the time. In the first quarter of 2021, a study found that there were 6,289 commercial bankruptcies in the United States.  

You often hear the different types of bankruptcies referred to as “chapters”—this refers to their chapter in the US Bankruptcy Code. Another recent survey of small businesses found that of respondents that filed for bankruptcy, 51% filed for Chapter 7, 22% filed for Chapter 11, and 27% filed for Chapter 13. We’ll talk more about these chapter types below.

When Should a Business File for Bankruptcy?

Instead of thinking about how successful—or not—your business is, when considering bankruptcies, think most about your debts and your ability to repay them.

“The truth is, if your business is consistently unable to keep up with your debts and expenses, it’s already bankrupt—or on a very short trajectory towards it,” explains Meredith Wood in AllBusiness. “Filing for bankruptcy protection is meant to help you get out of this untenable situation and keep many of your personal assets. You may be able to keep your business open while you pay off debt by reorganizing, consolidating, and/or negotiating terms.”

Filing for bankruptcy can lead to the closure of your business, but it can also be used to save your company by allowing you to renegotiate your debt situation. Either way, it doesn’t foreclose your ability to start another business in the future.

“While filing for bankruptcy does take recovery time, it isn’t the all-time credit-wrecker you may think,” Wood continues. “Typically, after 10 years, it is removed from your credit history, and you’ll likely be able to get financing several years before that.”

If you feel like your debt and business expenses are overwhelming your small business’s ability to continue, you should think about bankruptcy. The next step is to determine what type of bankruptcy represents the best way to move forward.  

The 3 Types of Small Business Bankruptcy

The 3 main types of bankruptcies utilized by small businesses are Chapter 7, Chapter 11, and Chapter 13. There are even more forms of bankruptcies for individuals, companies, and cities, but these 3 types are the main commercial options available to you.

The type of bankruptcy you pursue will mostly depend on how your business is structured and how you plan to move forward after filing bankruptcy.

Importantly, any bankruptcy filing places a temporary stay on your creditors and puts your repayments on hold while the court considers your situation.

Chapter 7: Liquidation

In Chapter 7 bankruptcy, a company is closed and its assets are liquidated in order to pay off its debts. In the popular imagination, this situation is likely the one most people think of when they think about bankruptcy. If you believe your small business has no viable future, Chapter 7 might be your best option. Chapter 7 might also make sense if your business doesn’t have a lot of assets to begin with.

Sole proprietorships file a personal Chapter 7, which takes into account both personal and business debts.

When Chapter 7 proceedings start, a “means test” is conducted on the applicant’s income. If the income is over a predetermined level, the application is denied. Next, the court appoints a trustee to take over the company’s assets, liquidate them, and distribute them amongst the creditors.

If it is a sole proprietorship case, a discharge is issued after the creditors are paid, meaning the business owner is no longer obliged to pay any more of the debt in question.  

Chapter 11: Reorganization

If you think your business can continue after bankruptcy, filing for Chapter 11 might represent your best choice. In this type of bankruptcy, the debtor plans to reorganize so that it can repay its debt while continuing operations. Working with a trustee and your creditors, you’ll have to devise an expansive plan that shows how you can repay your debt. Your plan must ultimately be approved by your creditors.

Chapter 11 is commonly talked about in the financial press, but it can be a hard process to navigate for small businesses.

“While Chapter 11 is designed to give distressed but viable businesses a second chance, it has a very poor track record with small and medium-sized companies,” a report from the Brookings Institute notes. “The costs of bankruptcy for small and medium-sized businesses are substantial—often 30% of the value of the business—and two-thirds are liquidated rather than reorganizing.”

There are good reasons to suspect that a Chapter 11 bankruptcy might work best for you if you don’t want to shut down. However, going this route can be expensive and lengthy—many proceedings take a year or longer to complete. It’s worth it to contact a qualified bankruptcy attorney if you want to explore Chapter 11.

Chapter 7 vs. Chapter 11

As complex as it is, you might want to research Chapter 11 if you feel like your business can continue with restructuring.

“The only reason you need to use Chapter 11 at all is to deal with recalcitrant creditors,” bankruptcy lawyer Bob Keach told the New York Times. “If creditors won’t negotiate with you, bankruptcy allows you to cram down a plan of restructuring.”

Remember, filing for Chapter 7 doesn’t mean you can never open another business, although financing might be more difficult to find at first.

Chapter 13: Reorganization for Sole Proprietors

If you’re a sole proprietor with a high income, you can file Chapter 13 bankruptcy. This allows you to keep your assets and property if you agree to a new repayment plan with your creditors. These plans usually last 3 to 5 years.

Does Filing for Bankruptcy Mean Going out of Business?

If you file for Chapter 7 bankruptcy, your business is closed and its assets are liquidated. If you file for Chapter 11, you’ll be allowed to keep your business open under a new plan with your creditors.

Will Business Bankruptcy Affect Me Personally?

A business bankruptcy could impact the business owner if your personal assets were used as collateral for your debts. Importantly, though, you will not go to jail for not paying a business loan.

“It depends on what personal guarantees you made,” Amy Haimerl writes in the New York Times. “Most small business owners put up their home or some other asset as collateral for start-up loans…If you used your house as collateral, it’s possible you would be forced to sell it as part of a Chapter 7 settlement. Under Chapter 11, you may have more luck.”

If you’re a sole proprietor and you file for Chapter 7 but fail the means test, you can file for Chapter 13. However, your repayment plan will be based on your income.

One of the big differences between personal and business bankruptcy is the means test. Individuals have to participate in a means test to determine if they are eligible for a Chapter 7 or a Chapter 13, while businesses do not have to undergo this for a Chapter 11 filing.

If your business is structured as a limited liability company (LLC) or a corporation, then your personal assets should be protected unless you used them to secure a loan.

If you file for bankruptcy as a sole proprietor, your personal credit score will lower significantly. Chapter 7 and Chapter 11 bankruptcies stay on your credit report for up to 10 years, while Chapter 13 bankruptcies stay on your credit report for up to 7 years.

If your business is an LLC or a corporation, its bankruptcy filing shouldn’t impact your personal credit score. However, if you personally guaranteed one of the company’s loans and you fail to repay, your credit score could be dinged. 

If you pay attention at all to your financial situation, you’re probably aware of your credit score, which is assigned to you by nationwide credit bureaus and impacted by your credit activity. Did you know another agency also pays attention to your banking activity and assigns you a score?

ChexSystems garners information about your banking activity—especially if it is suboptimal—from major banks across the country, much like how credit bureaus take in information from lenders. You can run into trouble if you are blacklisted by ChexSystems—you might not even be able to open a bank account for years.

Here are some things to know if you receive bad marks from ChexSystems.

What Is ChexSystems?

ChexSystems is an agency that tracks your banking behavior and provides this data to banks. According to recent estimates, some 80% of American banks use ChexSystems or a similar agency. Founded in 1971, ChexSystems is operated by FIS, formerly known as Fidelity National Information Services. Through the ChexSystems subsidiary, FIS maintains records on millions of Americans.

ChexSystems is similar to the 3 credit bureaus that assign you credit scores, but it looks at your banking risk instead of your creditworthiness. ChexSystems isn’t discussed as much as the credit bureaus—you might never hear of the agency unless you’re blacklisted by it.

Also like your credit score, your ChexSystems report follows you around. Any bank that utilizes the agency has access to your report, which can make it difficult to even open a checking account if you run afoul of ChexSystems.

Why Were You Blacklisted by ChexSystems?

You can be blacklisted by ChexSystems for a variety of reasons, but they all relate to your record of handling, or mishandling, a bank account. Commonly, people are blacklisted by ChexSystems for writing bad checks, failing to pay overdraft fees, or rating suspicion of fraudulent behavior. Generally, there needs to be a pattern of behavior for ChexSystems to blacklist you—you aren’t going to be on their radar if you overdraft once. But if your bank closes your account for bad behavior, ChexSystems will likely find out, and it will severely impact your record.

Once blacklisted by ChexSystems, it becomes very difficult to be approved for a traditional checking or savings account from most banks.

Bad records typically stay on your ChexSystems report for 5 years. However, there are some actions you can take to repair your situation.

How to Repair Your ChexSystems Report

If you discover you’ve been blacklisted by ChexSystems, you can take some steps to repair your report and get back into the banking system. These steps are especially useful if you believe that you’ve been the victim of identity theft or some sort of error was made. If you know your banking record is spotty, you’ll have fewer options to dispute your report—you might need to seek out bank account alternatives or wait until the records fall off in 5 years.

To repair your ChexSystems report, follow these steps:

1. Obtain your report from ChexSystems. You can obtain a free copy of your report online, call them, or contact them through the mail. By law, ChexSystems has to give you a free report every 12 months.
2. If you find errors on your ChexSystems report, dispute them with the agency. It is best if you have supporting documentation, like bank statements, but you can dispute errors without them. Through their process, ChexSystems will contact the banks that made the errors, but you might be able to speed the process along by contacting the erroneous bank yourself and alerting them to the situation.
3. If your ChexSystems report is bad but there aren’t any errors, you can improve it by paying down debts and fees reported by banks. Once you repay a debt, ask the bank or other creditor to update your ChexSystems report.
4. If all else fails, you can wait 5 years for your report to clear—and keep requesting ChexSystems reports every year to stay current. If you can’t go unbanked for that long, there are some alternatives out there.

Opening Bank Accounts While Blacklisted by ChexSystems

Some banks have so-called “second chance” checking accounts for people with bad ChexSystem reports.

“If your name ends up on the list of people with bad banking histories, you’re not locked out of the banking system forever,” writes Ben Gran for Forbes. “Be ready to review your ChexSystems report and file a dispute if you find any inaccurate information. And consider applying for a second chance checking account to rebuild your reputation as a responsible bank customer.”

These types of accounts usually have lower limits and fewer features. Some credit unions might not use ChexSystems, so you might have luck with your local credit union—or else you can apply for prepaid debit cards. 

Pop quiz: What do Twitter’s active users, the ratio of US households with a microwave, and streams for the song “Despacito” all have in common? 

The answer is non-linear growth. When they exploded in popularity, their metrics didn’t head in a straight upward line—the growth was exponential. 

While we might think of these events as quick spikes that should look like straight lines moving upward, the real world tends to work in curves. A pattern we see over and over again in business is essential to understand for your business planning. It’s known as the s-curve. 

What Is the S-Curve?

A company often grows slowly, then all at once. 

The s-curve is an exponential phenomenon in which your growth, charted chronologically, achieves cumulative results. After a burst of exponential growth, you then taper to a “new normal” at a higher plateau. The result is a chart that looks vaguely like an “s.” In math, you might call it a logistic function, which looks like this:

Source: “Building S-Curves for Projects in Excel Using Functions on Dates and Expected Completion Percentages,” Superuser.com.

Why is this important? Because an s-curve is a more accurate representation of real-world growth. As the Harvard Business Review notes, “There are time-delayed and time-dependent relationships in which huge effort may yield little in the near-term or in which high output today may be the result of actions taken a long time ago. The s-curve decodes these systems…”

In simpler words, by plotting an s-curve, you can form a more accurate projection of your business. This method lets you set more realistic milestones along the way. And these milestones may guide you to greater growth—even if it seems your business is hardly moving in the initial stages.

Why Use an S-Curve?

According to HBR, Facebook was a prime example of s-curve growth in action. It took the company about 4 years to reach a market penetration of 10%. Once it hit a certain threshold of users, “hypergrowth” took off. It doubled its total users within less than 2 years, eventually reaching maturation in the billions.

With an s-curve, these results made sense. Investors could set their watches by it, and Facebook could determine milestones accordingly. If they had plotted a strictly linear approach to growth? Their results might have utterly baffled them.

If you’re generating a business plan, the simplest reason to use an s-curve is that it’s a more accurate picture of how real growth works—as long as you know how to use it.

How to Incorporate the S-Curve Into Your Business Plan 

• Learn the key milestones along the way. The start, for example, is the point of the lowest momentum. Think of this as rolling a snowball down the hill—it takes a lot of snow packing and pushing before it rolls on its own momentum. At the points of growth and scale, the exponential growth begins to feel like it’s taking on a life of its own. By the time you’ve identified your business as being in a position of growth, it’s already time to plan for scaling. Eventually, plan on maturity—more on that later.
• Plot your key milestones along an s-curve. If you expect to grow 10% every year, that growth accumulates. 10% growth in 2022 won’t be the same number as 10% in 2021. This applies to every aspect of your growth: total users, total employees, and more. You can only create accurate milestones for growth if you anticipate the s-curve and build it into your projections. Doing so will help you to avoid being surprised when the cumulative returns catch up with you.
• Prepare for success. Most people don’t have to be told to prepare for failure—they’re well aware of what happens if a business fails to take off. But what if you hit a threshold that begins to lift your company in an s-curve? You don’t want it to feel like—for lack of a better term—a curveball. Using the s-curve helps you to understand when success is kicking into high gear, giving you ample time to plan for new employees, new systems, and scaling.
• Avoid overheating. This isn’t a “j-curve.” Even the world’s largest companies don’t grow to infinity: the s-curve eventually settles at the point of maturity. Avoid overheating by understanding your market and projections for market share and observing your results. This is a key insight in the s-curve that will help you set realistic milestones before you set new plans for growth.

But if you plan accordingly, you can be another example of the adage that “overnight” successes take time. They’re businesses that put in their hours, projected the right way, and stuck to a realistic plan for growth.

Social and emotional learning (SEL) is finally getting the attention it needs. An essential skill in children and adults, recent events—the pandemic, racial unrest, and increased screen time—have pushed it to the forefront for educators, parents, and even employers.

The Collaborative for Academic, Social, and Emotional Learning (CASEL) says, “SEL is the process through which all young people and adults acquire and apply the knowledge, skills, and attitudes to develop healthy identities, manage emotions and achieve personal and collective goals, feel and show empathy for others, establish and maintain supportive relationships, and make responsible and caring decisions.”

And it’s definitely a growth market projected to increase from $1.2 billion in 2019 to $3.7 billion by 2024. Any industry that’ll more than double in size is an opportunity for entrepreneurs.

Let’s take a look at what’s driving the growth of the SEL market and what that means for small business possibilities in the industry.

Why Is SEL Important?

SEL skills, similar to math or reading skills, don’t just happen. They need to be taught, modeled, and practiced regularly for both children and adults.

SEL core competencies include:

• Self-awareness
• Self-management
• Social awareness
• Relationship skills
• Responsible decision-making

Source: “CASEL’s SEL Framework,” CASEL.

Looking at those competencies, it seems like we might have all benefited from SEL training before the pandemic-related lockdowns.

That said, there is a need to teach or boost those skills as children transition back into physical or hybrid school models. Distance learning was a survival mode for parents, students, and teachers. Thus, SEL skills were among the skill sets that took a hit.

Kids need to be taught or reminded how to build relationships and relate to other people in person as there is no more video-off option. There aren't firm guidelines on what constitutes "too much" screen time for children's mental health. But it must impact them—after all, adults routinely suffer from Zoom fatigue. It’s time to help kids reset their brains for in-person and potentially maskless interactions.

SEL skills also set the foundation for additional learning. As Deb Meyer, a professor of education at Elmhurst University, says, “Academic goals cannot be fully achieved without social emotional knowledge and skills.”

That’s critical, given that many students are believed to have a learning deficit after a year or more of virtual learning. According to a Horace Mann Educators Corporation survey, respondents believe 85% of their students will have at least 1 month or more of academic progress to regain.

Source: “Closing the Learning Gap,” Horace Mann.

Who Needs Ongoing SEL Training?

The short answer to who could benefit from SEL training? Everyone.

This year wasn’t typical, so both adults and children could benefit from refresher courses on using SEL skills in day-to-day life. Like any other skill—CPR, martial arts, communication—SEL skills should be periodically reassessed to ensure bad habits haven’t replaced good intentions.

Let’s review children’s needs first. SEL programs may not have been strong in school systems before the pandemic. Still, virtual learning, as mentioned above, definitely left a significant gap in that training.

As kids return to school, they need coaching and supervision to learn and practice their SEL skills. As Ms. Meyers says, “When left to their choices, students do not always benefit from partner or group work because they do not know how to interact effectively.” In other words, we can’t expect them to magically demonstrate the same level of SEL competencies that they may have had a year ago.

Similarly, EducationWeek advocated that SEL skills need to be emphasized as “Children can’t process and retain new information if their brains are overwhelmed with anxiety.” Returning to school is a welcome change for many children, but it's a transition that will be stressful, even if it's joyful. There’ll be similarities to remote employees who have to return to the office. Suddenly, there’s commute time, mandated lunchtimes, and no dog to pet when you need a break.

Adults could also benefit from routine SEL training. Employers value workers with solid SEL skills. Those competencies permit employees to demonstrate the “soft skills” needed in the business world. As we all recover from various pandemic-related griefs, employers would do well to include SEL training as part of their workplace education offerings.

Business Opportunities in the SEL Market

Given the tremendous importance of SEL skills and the market's projected growth, plenty of business opportunities in this area target educators, families, or communities.

Business opportunities include:

• Join the ranks of e-learning businesses by creating content or administering e-learning that is focused on SEL training.
• Create an app. Some popular apps include SuperBetter and Calm, but there’s always room for another app on the market.
• Provide tutoring services focused on building SEL skills.
• If you have knowledge in the AI field, invent new ways to use AI in SEL learning.
• Build lesson plans or learning curriculums for teachers.
• Offer SEL-focused community services, including after-school programs or family workshops.
• Provide SEL-related employee training to other businesses. Perhaps it could support a business’s mental health coverage benefit to promote positive mental health.
• Start a consulting business to help schools or businesses evaluate SEL offerings and program effectiveness.

Tips for an SEL-related Business

Fundamentally, starting an education-related business includes the same steps as any other industry—know your customers, perform a SWOT analysis, create a business plan, and find and secure funding. But you’ll also have to navigate some education-specific items such as figuring out school calendars and adhering to student-related policies (e.g., FERPA).

As you pitch your business idea, remember to use your own SEL skills, including relationship-building and social awareness. The pandemic is fueling the growth of the SEL market. Speak from the heart about how your product or service can help—you don't want to be viewed as taking advantage of a bad situation.

If you have a unique idea and are ready to launch your new business, a startup business loan can give you the capital you need. But don't forget that there may also be opportunities to buy a franchise or an existing small business that already has a foothold in the SEL market. 

Whichever path you choose, know that you are providing a solution that could have a positive long-term impact on your customer’s lives.

Running a successful business is more than just selling a great product or service. Even if you’re recruiting customers and exceeding their expectations, you could still fail. Business owners need to understand the inner workings of their business intimately in order to make better strategic decisions.

This process typically relies heavily on business financial metrics. Gross revenue is one of the most important variables for business owners to grasp, as it’s a number that you’ll use in many equations to determine different trends within your company.

Let’s take a deeper look at gross revenue and why it’s important for small businesses.

What Is Gross Revenue?

Gross revenue, also known as gross sales, refers to the amount of money you bring in before you deduct your expenses. This concept contrasts with net revenue, also known as net sales, which refers to the amount of money you bring in after your expenses are deducted. 

In most cases, net revenue offers a clearer picture of how much money you have. For example, if you make $10,000 in sales but have $6,000 in expenses, then you would likely have $4,000 on hand. However, there are significant reasons to record your gross revenue and report these numbers. 

Find Gross Revenue on Your Income Statement

Both your gross revenue (gross sales) and your net revenue (net sales) can be found on your income statement. They are traditionally located at the top of the statement reporting the revenue you made during that specific time period. Revenue serves as the starting point for determining your profits—after you calculate your gross and net revenue, you can subtract the cost of goods sold (COGS), operating expenses, and other costs to determine your net profit. 

Most small businesses review their income statements monthly, quarterly, and annually. This allows them to view a small window of profits from the past few weeks (especially during a peak sales season) along with a big-picture view of revenue growth over time. These documents can guide organizational change to cut expenses or seek more revenue-producing opportunities.  

If you work with investors or seek out a loan, you may be asked to present your current and past income statements for review. These parties also look at your balance sheets and cash flow statements to track the health of your organization.  

Investors Look at Gross Revenue

Gross revenue highlights the potential for your business to make money, especially when it first opens. Investors look at gross revenue to understand if there’s a demand for your products or services. 

When businesses first open, they often have higher expenses than those in operation for some time. You might have business loans to pay back, startup costs like equipment, and other operating expenses like increased marketing fees for your business’s debut.

All of these costs will drive down your net revenue and make it look like you aren’t making money. However, just because you aren’t making money when you first open doesn’t mean your business isn’t an immediate success. Most companies operate at a loss when they first open—this is why investors look at gross revenue. 

Gross revenue can paint a picture of how customers react to your business. Your gross revenue will likely spike during a grand-opening event, for example, because you’ll bring so many people to your business. Each month, your gross revenue should increase as more people learn about your company and enjoy what you offer. Even if you aren’t making money yet, gross revenue can speak to sales and revenue growth. 

Investors look at gross revenue to understand demand and potential. You can prove that you’re driving more customers to your business each month and selling more items with each new and repeat customer who walks through your doors.  

Lenders Use Gross Revenue to Evaluate Risk

Even if you aren’t planning to work with vendors to fund your business, you may need to report your gross revenue to lenders if you want to secure a small business loan. Lenders evaluate gross revenue when calculating the risk of giving money to your business. 

If you can prove that your revenue continues to grow, a lender is more likely to give you a loan—this is because the odds are higher that you’ll be able to pay them back. However, if your revenue has been stagnant or declining, then the loan holds a higher level of risk. This is true even if you want to use the loan to grow your business and increase your revenue. As a result, you may get approved for a smaller loan or less favorable terms. 

This doesn’t mean you need to worry if you want to secure funding for your small business: your gross revenue is just one factor that lenders look at when approving loans. There are also multiple reasons why you might have lower revenue levels in the past few months or years—like a global pandemic. You just need to find the right lender who is eager to help. 

Add Context to Your Accounting Materials

Accounting can be intimidating to business owners who don’t have strong financial backgrounds. However, you don’t have to be a numbers expert to put together clear reports and provide their context. 

It’s not uncommon for income statements to come with a page of commentary: a separate sheet that provides context about the numbers to third parties. This commentary can help investors or lenders to better understand your reports. For example, you can explain why your advertising costs increased or your insurance costs went down. You can review revenue changes with investors and discuss your pandemic reopening levels. 

The numbers in your reports tell a story. You have the opportunity to interpret the information and take action based on what you think. 

Learn More About Other Key Accounting Terms

At Lendio, we’re passionate about helping small business owners achieve financial success. To learn more about the basics of accounting and bookkeeping, check out our resource center. We can also help you learn about different funding opportunities to grow your business. From short-term loans to business credit cards, our team is here to help you. 

Business operations refers to the processes you put in place to run your company. From the development of your products to their marketing and sales, your teams use operations to execute ideas. 

There are 2 key parts of business operations: process development and optimization. When a business first forms, teams will focus on operations development, which addresses who does what within the company. Then, as the company grows, teams will optimize the operations processes to save money and grow sales. 

Your business operations have a big impact on your business. Learn more about this aspect of your company and how to improve it over time. 

Why Are Processes Important?

Processes are a key aspect of your business operations. Anything that needs to get done in your company follows a set process. Your processes range from making key deliveries to establishing office best practices. There are multiple reasons why you need to develop clear processes—and why these processes need to documented. 

1. Processes allow for standardization. When everyone does the same thing the same way, you and your customers will always know what to expect.
2. Processes prevent burnout. Your team members can know what is expected of them and won’t feel pressured to take on tasks outside of their set roles.   
3. Processes can streamline your onboarding. New team members can quickly learn their roles and requirements by following existing processes. 
4. Processes promote fairness. This way, one team member doesn’t follow a set of rules while other employees ignore them. 
5. Processes create opportunities for improvement. Rules are meant to be broken and improved upon. Once you have a process in place, you can start optimizing it. 

For example, say a startup e-commerce retailer wants to create a weekly newsletter with items that are on sale. However, without a clear process, there are no guidelines for which items are promoted and which ones aren’t.

There isn’t a template for sending out the newsletter, so creating it is time-consuming—and if an employee sends out the newsletter and quits before documenting the process, no one knows how to keep it running. There never was a clear process, so a potential revenue driver is forgotten or ignored.

What Happens During Business Optimization?

The first year of your business is often spent on process development. You want to add a new feature to your company, so you create a process to grow your business operations. However, as your company grows, you may want to change these processes through optimization. In large companies, there are entire departments dedicated to optimizing business operations. 

During the optimization process, teams review business processes to see how they can be improved. These employees are looking for ways to save time, money, and energy while also looking to reduce risk. 

For example, Amazon’s site speed plays a significant role in its revenue. If the website slows by even 100 milliseconds, sales will drop by 1%. When Google’s pages take an extra half-second to load, search traffic drops 20%. By keeping the business operations for Amazon and Google running at their best, the 2 companies can keep customers happy and increase sales. 

There are multiple reasons why a company will look at a specific process to improve business operations. However, one of the most common reasons is that something isn’t working: 

• A process that should take a few hours is taking weeks. 
• A system that is meant to help customers is frustrating them. 
• Employees are making more mistakes or experiencing injuries after a new tool is introduced.

All of these factors alert operations managers that something is wrong. By intervening to address weaknesses in the systems, managers can improve business operations to help employees—and the company’s bottom line. 

How Can You Audit Your Business Operations? 

There are multiple ways to audit your business operations—and multiple reasons to do so. Some managers start with a full business operations audit whenever they are hired to a new company or department. They want to know how everything works and what can be improved. Other leaders conduct operational audits when developing their annual budgets or when an employee leaves. 

Follow these steps to audit your business operations: 

1. Make a list of key processes within the organization. Each employee can make a note of their specific processes. 
2. Talk to employees about how processes are completed. Focus on how long each process takes and the number of people who are involved. 
3. Ask for feedback on these processes. Do your employees have any ideas for how they can be improved? What might help them to complete their work faster—or better?   
4. Remove steps or change how processes are done. Clearly create instructions documenting the new processes and ask your employees to follow them. 
5. Track the progress of the new processes. Make sure they make sense and aren’t affecting your team members or other operations methods in any way. 

These steps may seem simple in theory, but they’re more complicated in practice. While 1 change might benefit the company and help you save money, it could also hurt your brand or employee morale in multiple ways. 

For example, to save time, a company might cancel its weekly team meetings and opt for an internal email instead. This might seem like it saves an hour; however, it could cost team members in other ways.

One employee might lose 2–3 hours collecting updates from managers and sending out that email. Other employees might ignore the email and miss important messages that they would hear in an in-person meeting. As a result, business operations suffer even though the change was designed to improve them. 

You Constantly Need to Improve Your Business Operations 

There will always be room to improve your business operations. New tools can help you to automate processes or save employees’ time. Your staff can keep coming up with ideas that improve their workflow.

However, if you’re dedicated to understanding your processes thoroughly and finding ways to do them better, you can stay involved in your operations—and lead your company toward growth. 

If you want to run your own business, you have basically 2 options: start your own or take over an existing company. Operating an existing small business, either through purchase, franchising, or inheritance, can take the pain out of many of the challenges new businesses face, like building a customer base or having data on seasonal sales patterns.

Of course, the business you buy may not be running at an optimal level. Before buying a business, you should understand how to scrutinize existing businesses and how to strategize and leverage the strong elements of a business toward more growth.

In researching how to buy businesses, you’ve probably come across the concept of a “turnkey business.” This refers to a type of business for sale that’s ready for a new owner right away. Read more to learn what’s involved with turnkey businesses, why you might want to buy one, and what you should look for when comparing your options.

Understanding Turnkey Businesses

To be considered a turnkey business, a company must be fully functional and operating at full capacity. This doesn’t necessarily mean the business is profitable, but it can’t be majorly hindered by problems like broken equipment or missing infrastructure.

Of course, not every turnkey business exists in a physical space like an office or strip mall, but all are ready to continue operations upon purchase. Examples could include a restaurant under new management or a laundromat looking for a new owner. In some cases, the new owner might not change anything—one day, the business was making money for its previous owner, and today it’s turning a profit for you.

In many cases, though, there’s a reason that a business is put up for sale. Sales could be flagging, the seller might not want to run a business anymore, or the seller might need cash. Additionally, you might sense that there are ways you could expand the business better than the previous owner.

What Are the Benefits of a Turnkey Business?

Alongside this, another advantage of a turnkey business is that the company’s proof of concept usually works. There could be issues with profitability, management, and sales, but you typically aren’t reinventing the wheel when you buy a turnkey business—most turnkey businesses are either running well in the moment or in the very recent past, or else you might have a plan about how you can make the company profitable.

A disadvantage to turnkey businesses, especially franchise situations, is that the business might already be locked into contracts and obligations that you aren’t interested in maintaining. However, if you buy the business, you’ll then be a party to these pre-existing agreements.

How Do You Find a Turnkey Business?

Purchasing a franchise location is another common way to buy turnkey businesses, although it’s also one that comes with some major restrictions imposed by a corporate entity—which is both an advantage and a disadvantage. Franchises are known among the small business crowd for their lower failure rate compared to small businesses overall.

You might also consider multi-level marketing (MLM) businesses, where you sign some agreements and pay for inventory—a type of turnkey business—but these types of companies remain controversial and have a shaky rate of success.

Like with all other forms of shopping, a very popular way to find turnkey businesses is to browse online. A quick Google search will pull up several platforms with businesses for sale in your city, state, or region. In this situation, all the due diligence is on you to make sure the purchase is worth the investment.

“Look at the existing infrastructure and make sure you understand everything that comes along with the purchase,” the Small Business Administration recommends. “Don’t be afraid to ask questions about contracts, leases, existing cash flow, and inventory. The more you know, the better equipped you’ll be to make a sound decision.”

How Do You Buy a Turnkey Business?

When looking for a turnkey business, you should consider 3 key aspects: customer fulfillment, marketing, and sales ability. You should measure how well the company serves its customers so they’ll return with future business. Pay attention to how the company markets itself and how well its brand penetrates the marketplace. Finally, you should look at the sales ability of the company—how does it leverage its marketing toward actual sales?

Once you find a seller, you should hire a financial expert to do an appraisal so you get an accurate price for the company and its various assets, talent, customer networks, and other valuable elements. To make the sale, you will probably have to explore your funding options unless you have all the cash on hand. Online lending platforms like Lendio make finding loan options easy, so you can take your business to the next level.