In this last few months we have seen two of the most reputable diamond dealers in Australia close their doors, and we the Australian diamond industry will feel the void.

This article is not a commentary on why either Miller diamonds or Storch ceased to operate, this is about a wakeup call to everyone in the diamond jewellery industry, to stop and question where you are today in your business in real terms.

I will preface this article to state that I speak from personal experience, in that I set up a business in America with considerable capital, only to reach a point after three years that I could not sustain the operational expenses and had to close it down.

The simple answer to why businesses fail?

“When your expenses are greater than your revenues,

at some point in time your business will fail”

It sounds so obvious, but the problem that most businesses suffer is an overly optimistic view of the future which is not supported by the numbers. Entrepreneurs and small business owners like to think that they can "trade out" of their financial woes; this is rarely - if ever - the case.

Those who read my articles are familiar with my never ending push to think in terms of reinventing ourselves. We must constantly find ways to add value and to build relationships which are almost symbiotic, meaning we rely on each other to survive.

If you’re unsure about the health of your business, I would suggest to anyone to sit down with your accountant and ask them the hard questions. Don’t be afraid to ask “based on my current trading figures, can I really get myself to a profitable position?” If the answer is no, you need to ask what needs to be done (this inevitably involves cost-cutting), or if he or she truly believes that you are in an unwinnable position, how can you are untangle yourself legally and commercially so that you can either start again, or find a way to generate an income.

Business success and failure

I have in recent times assisted a number of businesses which have been in these circumstances and have learnt that if you find yourself in this spiral, sometimes you are better off to declare yourself bankrupt.

The key is that you can personally appoint a friendly receiver which again, based on the circumstances, may allow you to continue to trade, with your personal debts expunged. Declaring oneself bankrupt is not a pretty thing; there are numerous consequences if you pursue this strategy. Currently in Australia you cannot be a director for three years following bankruptcy.

In some circumstances you are unable to travel overseas during this period of bankruptcy. You must also be aware that you cannot own any assets, so if you share half the family home, it can be sold. Going bankrupt is a last resort but if you clearly have no way out, its far more honourable than continuing to take goods from suppliers who will never get paid in the future.

In one of my early articles I recall discussing the sorts of relationship you may have with your suppliers.

If engagement rings are your business and you are buying from one or two main suppliers, have you invited the principal of the business into your establishment and asked them what can you do better; how can you improve your business? Do they have any suggestions? If you’re struggling to make repayments, come clean, talk to them!

If the diamond dealer knows that you’re being straight with them and asking for their assistance, they will be more amenable when it comes to getting credit. However, remember who was there to help you when the chips were down. There is nothing more upsetting in business (having gone out of your way to help someone) than to be forgotten when the good times come around.

Trade well.