From Red Flags to Recovery: How One Business Owner Dodged Bankruptcy
Chris Peden, CPA, CMA, CFM
I help small business owners grow their profits and cash flow and reduce their taxes by finding the holes in their financials and creating an action plan to plug them to create the business that funds their ideal life.
When Sarah opened her boutique marketing firm, she had big dreams and a solid client list. But just three years in, she hit a wall. Revenue dipped. Bills piled up. Clients delayed payments. And her credit lines? Maxed out.
At first, she hoped it was a temporary dip. A seasonal lull. But the losses kept growing. Each month ended with more money going out than coming in. It felt like her business was slowly bleeding out.
That’s when she asked the hard question most business owners avoid:
“Is bankruptcy in my future?”
It was a wake-up call. And instead of spiraling, Sarah chose to face the numbers head-on. She got real about what was happening—and what needed to change.
If your business is showing signs of financial stress—like Sarah’s was—this story isn’t just a cautionary tale. It’s a roadmap. Let’s walk through the exact steps Sarah took and how you can apply them to get your business back on track.
Step 1: She identified what was really draining her business
Sarah started by reviewing her profit margins across services. Turns out, one of her major offerings—custom video production—was eating up hours and cash but barely breaking even.
She didn’t want to let it go. But she had to ask the key question:
“If this service isn’t profitable, why am I keeping it?”
Within weeks, she phased out the underperforming offer and sold some of the equipment used for it. That move alone freed up time, reduced overhead, and brought in $18,000 in cash.
Your takeaway: Go line by line through your offerings. If something’s consistently losing money or draining resources, consider letting it go. It might be time to stop propping up a service that just isn’t working.
Step 2: She put a hard pause on expansion
Before things went south, Sarah had been planning to open a second office. The lease was signed, deposits paid. But as things unraveled, she recognized that expanding during a financial downturn was a mistake.
She negotiated her way out of the lease (losing her deposit but avoiding much larger monthly costs) and redirected those funds into stabilizing her current operations.
Your takeaway: Growth is great—but not at the cost of survival. If you're facing cash flow issues, put expansion plans on hold. Focus on making your current business stronger before making it bigger.
Step 3: She got ruthless with inventory and receivables
While Sarah didn’t sell physical products, she did have unused software licenses, branded merchandise, and stacks of unused office equipment. Instead of letting it sit, she liquidated what she could.
More importantly, she tackled overdue invoices. Instead of hoping clients would eventually pay, she introduced late fees, followed up aggressively, and even offered small discounts for immediate payments.
Your takeaway: Cash is king. Unused assets and unpaid invoices are money sitting idle. Sell off what you don’t need and get serious about collecting what you’re owed.
Step 4: She brought in outside eyes
This one was hard. Sarah prided herself on being hands-on with every part of her business. But at this point, she knew she couldn’t fix it alone.
She brought in an accountant to dig into her financials and help her build a realistic recovery plan. Together, they analyzed cash flow, negotiated better terms with vendors, and built a 12-month forecast she could actually follow.
Your takeaway: You don’t have to do it alone. An outside expert can spot inefficiencies, blind spots, and opportunities you might miss. Getting help isn’t a sign of weakness—it’s a smart business move.
Step 5: She got proactive about prevention
Once the bleeding stopped, Sarah didn’t just go back to business as usual. She made prevention a priority.
Your takeaway: Don’t wait for another crisis. Build habits and systems that keep you ahead of trouble. Prevention is a whole lot cheaper—and less stressful—than recovery.
Final Thoughts: The Future Looks Different Now
Six months after hitting her low point, Sarah’s business is back in the black. Profit margins are healthy. Cash reserves are building. And she finally feels like she’s running the business—instead of the other way around.
Her story isn’t unique. Plenty of businesses hit rough patches. But the ones that survive—and thrive—are the ones that act early, make hard decisions, and stay committed to doing the work.
So ask yourself:
If the answer is yes, maybe it’s time to take the same steps Sarah did. Because the road to recovery starts with facing the truth—and deciding to do something about it.
If you're unsure where to start, I'm here to help. Let’s talk about what’s working, what’s not, and how we can get your business pointed in the right direction.Book a chat with me here.