How Long Can I Run in the Red?

You are a firm believer that a company should run its books in the black, but your company has been taking losses for several years now. Is it an unrealistic goal to make a profit every year?

If you are the sole owner of a company, it's a personal decision whether you should continue running in the red. If you have sufficient personal assets, you can continue as long as you're comfortable.

First, however, you may wish to do some financial projections. With the help of a CPA, you should assess the cause of your problems and determine how much longer you are likely to generate a loss.

Whatever your personal preference, think hard about what it would take to turn your company around. Conduct some market research with your current customers to assess what they like and dislike about your services, and what you might do to improve them. You may uncover something about your services or business practices that's inhibiting your firm's growth.

You may also want to determine if you can raise your fees. See how you might do more targeted, efficient advertising. Get involved in community-based organizations to expand your referral network. Work with your accountant to assess your cash flow and what you might do to improve it. For example: Are you collecting your receivables quickly enough? Is your staffing top-heavy?

After you've performed all these analyses and spoken with someone who might be financially dependent on you, make a decision about continuing or pulling the plug.

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