- The business of shutting shop gracefully | Ensuring smooth closure a big task
Every business has a lifecycle. There are very few businesses that survive through generations. Ensuring a smooth closure is one of the biggest tasks that a firm needs to undertake, says Harish H.V.
Harish H.V., partner, Grant Thornton
If the company in question is consumer-facing, open communication with suppliers, lenders and shareholders is important. “The firm should distribute the remaining funds among its vendors, lenders and shareholders if the firm is on the verge on bankruptcy. This will ensure that the promoter reputation is not tarnished significantly,” says Harish.
The reputation of a firm or its promoter takes a hit when stakeholders sense that they are being cheated, says Harish, adding distributing the remaining funds in a transparent manner will ensure a peaceful closure. If the company is offering a service, it should help customers migrate to another service provider. “Tying up with another service provider will lead to a hassle-free transition for the customers. In case a tie-up is not possible, the customers should be alerted well in advance about the company’s closure,” says Harish.
Most employees are usually well aware about the stress their firm is facing and the most talented are the first ones to exit. “For the remaining employees, however, the firm should hire an HR firm in order to place its employees in other organization,” says Harish.
Again, it will make more sense if a firm readies itself for a closure. For instance, it can ask other service providers to acquire its assets and customers well in advance. “This will not only allow a smoother transition for customers, but will also fetch the company some money to pay its dues,” says Harish. These measures, along with clear communication within and outside the organization, will allow a firm to shut shop with considerable ease, says Harish.
The complete article appeared in Mint. The article can be found here.