What are the Possible Causes of Bankruptcy?

What started as a nice idea, turned into an imminent bankruptcy. Your beautiful plans turned out to be a lot more difficult to implement in reality. After hard work, you have to face the hard truth: you are heading for bankruptcy. What happens in the event of an impending bankruptcy? What matters do you have to deal with? How can you prepare for it?

Thousands of companies go bankrupt every year. This can be the result of an economic crisis or a sharp decline in the market, but often the cause of the bankruptcy lies within the company itself. In this article you will read 10 common causes of bankruptcy.

  1. The turnover is too low

If you as an entrepreneur do not know the figures within your industry and do not anticipate them, you are in constant danger. It is important that you know what the competition is doing so that you can compare your own figures with it. This way you will immediately discover when your turnover is lagging behind the competition and you can intervene in time to prevent bankruptcy.

  1. Less Flexibility

Fixed costs, such as lease cars, personnel costs and housing can be culprits for your company. Especially when your company is (temporarily) not doing well, high fixed costs can cause many problems. Do you notice that your company is not doing well financially? Then reduce your fixed costs where possible. For example, you can cancel your lease contracts, find a cheaper location or start working with flexible contracts.

  1. High interest and financing costs

To grow quickly as an entrepreneur, capital is needed. The bank often provides capital in the form of a current account area. By definition, these are short-term debts. However, these debts are often used for far too long, so that entrepreneurs have to deal with high interest rates and financing costs for a long time. Instead, you want to pay off your current account as quickly as possible.

  1. Ignoring short-term debts

The longer your debtors are open, the greater the chance that they will stop paying at all. This can put your business at risk. When you have a serious shortage of resources, your company goes under. Even if you still have to receive a lot of money from debtors. That is why it is important to go after your money and to ensure that debtors pay (on time).

  1. Ignoring the market trends

This is the common reason companies go bankrupt. To keep your business running, it is important that you have a good understanding of your competitors, customers and the trends in the market. If you don’t keep up and your competitor does, it can cost you a lot of customers and eventually even lead to bankruptcy.

  1. No more innovations

As an entrepreneur, it is important to always remain alert. A product or business model that was successful last year may now be outdated due to new developments. Therefore, keep a close eye on what is happening in your field of work and make sure you keep up with all developments. By continuing to innovate, you prevent your company from becoming obsolete and you ensure the continuity of your company.

  1. Maintain your product cost

Many entrepreneurs know what their cost is. This applies to companies that make or sell products, but certainly also to companies that provide services. If you do not know what your cost price for your product or service is, you also know what extent your company is profitable. Without insight into your cost price, bankruptcy can just happen, without you seeing it coming.

  1. Staff turnover is too high

Good and motivated staff is important for a successful future of your company. Therefore, try to bind your employees to you. A reliable team that knows your business and processes through and through will ultimately deliver the most quality and efficiency. When there is too much staff turnover, it puts the continuity of your company under pressure.

  1. Know your company / products

Many entrepreneurs are not aware of the figures within their company. How quickly do debtors pay? What is your turnover per day? What are your fixed costs per day? When do you break even? Based on these figures you can steer your company in the right direction. Without insight into the important numbers, you are running your business on the basis of a guess. That can end well, but there is also a good chance that it will go wrong.

  1. Create a Proper business Strategy

To prepare for the future of your business, it is important to create a business plan. In case of an impending bankruptcy, a survival plan is mandatory. Your survival plan should focus on making short-term profits. Think of a maximum of two months. The fact that you are dealing with an impending bankruptcy means that something is not quite right within your company. That’s why you don’t want to continue in the same way you were doing. Therefore, come up with a new strategy, a different approach and adjust your business model. A new strategy can bring about major changes within your company. You may have to lay off employees or curtail certain departments. There is a lot at stake. That’s why it’s important to pay proper attention to your survival plan.

Analyze your Business

When the financial situation has been clearly mapped out, it is time for a broader analysis. Important things that should not be missing are:

The purpose of problem analysis is to arrive at new insights for possible solutions.

When to ask for help or advice?

If you are in danger of going bankrupt or have already been declared bankrupt, a lot will come your way. In this often hectic period, it can be difficult to keep an overview. In such cases, you will benefit from someone who is knowledgeable and can help you make the right decisions. An insolvency lawyer from a reputed firm like Anthony Joyce can help you with this. Ultimately, the knot will have to be cut. Before starting, we recommend to contact individually and enter into an initial conversation. This way you immediately notice whether it clicks or not and whether it is the lawyer you are looking for.


When you have a clear understanding of the company’s financial problems, it’s time to seek expert help. There are several agencies for this. They can help you get important matters in order and can act as an intermediary when the stress becomes too much. Professionals like Anthony Joyce will help you survive in the short term.

Further actions you can take is to approach outstanding debtors to collect outstanding bills as quickly as possible. Also check whether you have unnecessary items in your household effects that can be sold. In order to make good choices in this regard, an expert can watch with you. If you have had a short conversation with all three lawyers, you can list the advantages and disadvantages of each lawyer and make a final decision. Listen carefully to your gut feeling and choose a lawyer you trust.

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