Anonymous

“Even if a firm is losing money, it may be better to stay in business in the short run.” Is this statement ever true? Under what conditions?

2 Answers

Derek Alvarez Profile
Derek Alvarez , President, CEO of Ezlifegadgets.com, answered

There's alot of factors that play into that.  If you're losing money but have a large order or big account your working on, then it may pay off to tough it out.  

On the other hand, if your losing money and the only way to stay in business is a large input of capital then you better get the investment or close down before you go into massive debt.

Sara Lewis Profile
Sara Lewis answered

I think it is definitely true that businesses should try to keep going in certain circumstances. Business is not a straightforward climb to financial success, there are factors outside of your control that can affect things.

Starting up. When you first start out in business it is normal to run at a loss for several months, sometimes years. It is important to have the financial backing to make it through these times whilst you are establishing a client-base.

Economy. Economic downtowns can happen at any time and can have detrimental effects on your business. But, as above, you just need to be patient and ride it out.

Transitional Periods. Rocky times are normal in any business, particularly during times of change- if the business moves in a new direction, or during expansion.

The key is working out when the hard times are just a phase rather than a general decline.

Answer Question

Anonymous