In this scenario, you have just taken over a small business. For the last 8 years, the previous owner spent more money than the business was taking in. They did so for a number of reasons: part of the building caught on fire, and expensive repairs were necessary, the business was robbed, and the owner lost inventory (without insurance), the owner made some risky investments that did not pay off, etc. You go through all of the financial records and realize that some of the yearly expenses were never even written into the already in-red budget. So you rewrite the budget to include those unaccounted expenses, and you realize the company is deep in debt.

Business hasn’t been very strong for a few years, and some of the workers have already had their hours cut. You don’t want to cut them any further, so hoping that business will improve, you start giving them projects to do around the company that will eventually lead to less maintenance, better efficiency and more revenue.

Meanwhile, law requires that you continually hire on more workers once they have reached a certain age. These people have been putting money into a payroll account for you to use to pay them, but thanks to inflation and rising healthcare costs, its not nearly enough money to pay them.

You continually look at other businesses, and see that they are also having the same issues you’re having. Not a good sign for a recovery of business anytime soon.

Your bank calls you and informs you that the line of credit you’ve been using to cover these extra expenses during this rough patch is about to hit its limit. You ask the bank to raise the limit, hoping that business will eventually improve. You’re able to make your monthly payment, but the bank is concerned about your budget, and won’t agree to raising the limit until you show that you’re going to be able to sustain with this new limit increase.

You have some options. You can cut hours and lay off some of your younger, less expensive employees. You aren’t required by law to keep them on, like you are with the older employees. You can cut some of the payments you’re giving to your older employees. You know with both of those options that these cuts are really going to affect these employees, and they probably won’t be able to find work in another business, as all businesses are suffering. These employees are the most vulnerable, and may end up homeless. You could raise revenue by eliminating the discounts you were giving to your more affluent customers, or by raising your prices. The product you sell is one that they need, but it might make them less likely to buy as much of your product. You know they don’t need the discount, they’re doing surprisingly well in this economy, but you’re concerned about making them unhappy, and having them give you and other companies less business. 

What do you do?