Cover Story

Almost 90 percent of small businesses that try to reorganize under Chapter 11 of the U.S. Bankruptcy Code ultimately fail, according to the American Bankruptcy Institute.

Going out of business is never fun, but life doesn?t end when you do. So give yourself time to mourn. Nobody likes to be defeated. Businesses are like children to entrepreneurs and their demise can hit hard.

While entrepreneurs have dreams of success, they also must take into account what happens if things go awry. The best way to make sure one?s personal assets won?t be at risk in a turnaround is to plan for exit options before opening your doors.

Write a complete business plan. Create a group of advisers that includes an accountant, a lawyer, a banker and maybe potential vendors from the industry. Work with them to determine whether the business should be a sole proprietorship, a corporation or some other entity.

Upsize Stages is a series of guides detailing how to operate businesses at distinct stages in their life cycle. This is the first guide to be published, Upsize Stages Turnaround: How to revive a distressed business.

Small-business owners tell Upsize that handling troubled times is one of their biggest challenges, yet when problems arise it?s not easy to know what to do or who can help. This guide is intended to succinctly help companies with all facets of the challenge, and introduce them to local experts who can act as trusted resources.

Upsize reporter Andrew Tellijohn interviewed sources to prepare the articles, including business owners who have executed a turnaround successfully accountants, attorneys, bankers and other financiers who specialize in helping companies through refinancings, workouts and bankruptcy court and management consultants whose business is turnarounds. Contact information for major sources is at the end of the guide.

The guide includes excerpts from Q&A interviews with experts in the field of turnaround management. Hear the full podcasts by clicking on the Upsize How-to Audio link to the left and the expert?s name.

Depending on the industry in which your business is involved, the indicators will differ. So the first thing a business owner should do is make a list of the indicators that will determine the future of the business.

One of the biggest mistakes entrepreneurs make when their businesses start to go south is adopting a bunker mentality. Going quiet will scare trade creditors, banks and other players who truly want to see ? and can often help ? the business succeed. Instead of ignoring those phone calls, business owners need to further embrace the bankers, accountants and lawyers they?ve been using as a roundtable of advisers even more tightly when things go bad.

When a small business is struggling, it is often difficult for the owner to determine what must be done to turn it around ? or whether the company is even salvageable. The business is that entrepreneur?s baby and the owner might be too close to find a solution. Of the owner might begin taking chances, digging into personal resources, taking out mortgages or putting personal assets on the line to save something that will end up a casualty.

Once you?ve started working with a turnaround specialist you?ll create a short-term plan for turning the business around. Whether you?ll succeed in the long-term is a function of time, capital, internal resources and whether you have a business that has a viable value-added service or product in your market.

Whether it?s turnaround management, filing bankruptcy or providing accounting advice, there are many bad apples masquerading as experts in their respective fields. And when you are taking the time and money to fix your company?s misfortunes, that isn?t the time to run across those people. So it?s extremely important to find reputable people to help you through the work.

If your situation is tough and you?ve fallen behind or gone into default on your loans the process for reversing that can be painful, but it can also be survived.