One of the best bankruptcy quotes is from Ernest Hemingway’s book ‘The Sun Also Rises’.  Mike is bankrupt and Bill asks him how he went bankrupt.  Mike said, “Gradually and then suddenly”.  He is absolutely correct – most businesses don’t go into insolvency overnight but rather the situation develops gradually over time and then there comes a point where an event happens to bring matters to a head.  This might be an action by creditors such as a Director Penalty Notice, a creditors petition, or a winding up application, or by the business owners or directors such as a debtor petition or voluntary administration.


But it doesn’t need to get to a sudden, catastrophic event if we look at the gradual reasons.  I group these reasons into the ‘seven deadly sins of distressed businesses.’


  1. Procrastination

It’s human nature to gravitate to the things you like doing or give you pleasure and put aside those things that don’t.  People don’t like issues and if they ‘forget’ them’ or ‘put them aside’ their day will be better.  This might be things such as dealing with a problematic staff member, calling debtors who have not paid by due date, or avoiding their tax and super obligations as the other creditors are standing at the reception desk demanding payment.  But this procrastination does not resolve the issue.  It does make the issue worse, and issues needing attention and are not dealt with.  You’ll actually sleep better and be more productive by tackling problems while they are manageable.

  1. Working in business not on business

Bill the plumber has a struggling business.  Everyone rings asking for Bill to attend to their plumbing problem, so Bill obliges.  To help improve Bill’s business situation he spends more and more time on the tools.  He is working 14-hour days six days a week.  He is exhausted, he is cranky to the point those dear to him prefer when he is at work than at home.  All the ‘business things’ are not being done as he doesn’t have time and is too tired.  It is a falsehood that your business will operate OK or get better by spending more time on the tools.  I don’t see many businesses in distress because they are bad practitioners – bad plumbers, or sparkies, or web designers, or hairdressers.  I see businesses in distress because of three reasons only:

  • Lack of business skills
  • Not applying business skills
  • Not work on the business

I spend a day a week working on my business i.e., not on client engagements.  Business owners need to put aside time to wok on their business – marketing, networking, financial management, planning, staffing, systemisation etc.  One thing I ask all new clients is when you’re out somewhere – a wedding, a sports event, a BBQ etc and you meet someone new and get asked the inevitable question ‘What do you do with yourself?’ what do you reply.  If my client was Bill he almost certainly would say he’s a plumber.  Wrong answer – he’s a business owner (of a plumbing business)!  Bill needs to stop thinking he’s a plumber and start thinking as a business owner.  Doing this he’ll start to focus on the business rather than in the business.

  1. Arrogance

The dictionary defines arrogance as “an attitude of superiority manifested in an overbearing manner or in presumptuous claims or assumptions”.  In distressed businesses this occurs when the business owner thinks they are the smartest person in the room, that they are the experts and no one else understands their business.  I shoot this down by asking if you’re the smartest person and understand everything why is your business in distress? If you could of fixed it you would have already. There are two truths about every business.  Every business is the same and every business is different.  All businesses buy and sell goods and services, must manage staff, production, workflow, have bills to pay and receivables to collect, tax returns to submit.  They are all the same.  Every business has different people, processes, culture.  They have a different way of doing things, and their own ‘secret sauce’.  They are all different.  Don’t be arrogant and believe others cannot contribute or have ideas and solutions.

  1. Not seeking help early

The number one wish I have for any business in distress is to get help and get help early.  It benefits all stakeholders – owners, employees, customers, suppliers, and other creditors.  It provides more options to manage the situation for a reasonable expectation of a better outcome.  It preserves value in the business.  I had a client who had been operating his business for eight years and he contacted me.  “Hey Stephen – I have a great business, making a profit but don’t have any money”.  In reality, his revenue was declining, the business was not covering overheads, he was withdrawing money from the business like it was his personal ATM, and owed several hundred thousand to the ATO, unpaid super, and various creditors.  It was too late, and he ended up filing a debtor’s bankruptcy petition.  His problems didn’t start the day he contacted me and if he had addressed the issues and sought help even 12 months prior the situation could have been different as his options would have been greater.

  1. Pride

According to Christian belief the first sin ever committed was an act of pride when Satan refused to recognise God as his Lord.  Of the seven deadly sins, theologians and philosophers reserve a special place for pride. Lust, envy, anger, greed, gluttony and sloth are all bad, the sages say, but pride is the deadliest of all, the root of all evil, and the beginning of sin. Pride is delusional, spiteful, and bitter. At its root, it declares, “I don’t want God to be God. I want to be God!”.  There are five ways pride can destroy your business:

  • You fail to realise your business is a failure.

Just because you think your idea is ingenious, ground-breaking, unique doesn’t mean others will think it is.  As Forbes writer John Hall says “Don’t force your pineapple burger just because you came up with it. Be real with yourself and your team; don’t let your pride get in the way of your next great idea.”

  • Ego is out of control.

Confidence sells, ego kills.  It’s easy to let your ego sink your ship – and it’s equally easy to see your business drown along with it.  Put a process in place to test your ego.

  • You become too scared to ask for help

You don’t need to do everything yourself and also don’t undervalue help.  Sure I can build a website, I can frame a wall, I can mow the lawn, and I can do bookkeeping.  But you can hire others to do them, and they be experts and do them better and faster.  Value their expertise, value your time and don’t insist on doing everything yourself.

  • You make major decisions without consulting your team.

Don’t fall into the trap that your decision-making trumps everyone else.  There’s a reason you surround yourself with great people: They’re there to tell you you’re crazy when you think your business should start an airport kiosk sales station or buy from the next salesman peddling air.

  • You don’t know when it’s time to exit.

In February 2023, Nicola Sturgeon the Scottish First Minister unexpectedly resigned. She said she knew it was the right time to leave for herself and for Scotland.  Do you persevere with an idea, or in a role?  Every business owner from the very first day of operating should have an exit plan.  Pride will keep you in longer, and it could lead to the demise of your company.

  1. Family and friends

Every business is a family business – small, big, private or public.  That’s because what happens at work affects you and impacts you and those at home, and vice versa.  How you manage the contention though can greatly impact your business and everyone is different.  I like leaving work at work and continually discussing work issues creates an unbearable noise for me.  My wife though, comes home and downloads – it is her way of decompressing. Two other dangers with family and friends is the assumption that they are your customers – they aren’t so run your business for your real customers.  Second unless they are a proven expert in a topic then they are not – and don’t seek their advice or elevate the value of their advice (seek their support, friendship, and love for you though).

  1. Affluenza

Investopedia defines affluenza as “a social condition that arises from the desire to be more wealthy or successful. It can also be defined as the inability of an individual to understand the consequences of their actions because of their social status or economic privilege.”  I was at a client in a lower socioeconomic area in western Melbourne and there were a staggering number of luxury cars driving around the area and big boats being towed expensive 4wds with business branding.   I drove around the area with my client looking at new housing developments, where the houses all had new window fittings, landscaped gardens, and I expect new furniture and fixtures and fittings inside.  While I admit I’m a little older than most people that live in this area I can still remember when I was starting out like them.  But what astonishes me (and yes this is a generalisation) is the need to have the newest and the best of everything, and have it now. In business affluenza is fatal.  Do you need an $90,000 4wd as your work vehicle or would a second-hand little car suffice?  Do you need a new machine today, or can you carry on working with the old one for a little longer?  A turnaround advisor will look at short-term cashflow as one of their first and primary tasks.  When I do this, requests for expenditure get met with the question “Is the expenditure a like, want or need?”  The process of understanding this and the discipline to live within your means will avoid problems.

Being in business can be great.  In my book ‘Run Your Business Better’ I start by questioning the reason the reader is in business.  There are three reasons – make money, have fun, and make money and have fun (which should be every business owner’s aspiration).  Don’t fall to the evil of the seven deadly business sins – have fun and make a good return for your effort and risk.