Restaurant · Guide Updated August 2026

4 Actionable Steps to Prevent Your Restaurant from Going Bankrupt During a Crisis

Opening a restaurant is exciting. Keeping it alive when revenue drops to zero is not. Whether you are navigating a pandemic, a slow season, or a neighborhood construction project that killed your foot traffic, the same four steps determine whether you survive or go under. These are the exact steps I worked through for my own locations during COVID-19, and the same ones I ran through with every client I was advising at the time.

Step 1: Know Your Vital Signs

When you show up at a hospital in pain, the nurses do not ask how you feel. They take your vital signs immediately, because they need objective data before they can treat anything. Your business is no different, and yet almost no one in F&B actually does this exercise.

There are four numbers you need to pull together right now.

Cash balance. Log into every bank account you have and write down the total. That is your starting point.

Accounts receivable. This is money already owed to you that you have not collected yet. A catering deposit where the client still owes you 50 percent. A corporate order that has not been paid. I have worked with clients who had tens of thousands of dollars sitting in uncollected receivables simply because they were too busy running their shop to chase it. That cash exists. Go get it.

Cash flow from operations. Your bank balance and your actual cash flow are not the same number. Your payment processor or POS system may be holding funds for a day or two before they settle. A wire transfer from a catering client may take a week. On the outgoing side, you may have checks written that have not cleared yet. Map every dollar coming in and every dollar going out so you know your real position. The last thing you want is to write ten checks that bounce because you were looking at a stale bank balance.

Fixed versus variable expenses. Fixed expenses exist whether you open your doors or not. Your lease is the clearest example. You signed a five-year deal and that number does not move. Insurance premiums are the same. Variable expenses, like payroll and cost of goods sold, scale with how much you operate. Separating these two categories tells you exactly how much money is bleeding out even on a day you never unlock the front door.

I know none of this feels exciting. Marketing is exciting. Operations is exciting. Staring at a spreadsheet is not. But I have a friend who ran a poke shop with a line out the door every single day, including during COVID-19. When we sat down and did this exercise together, we found out he was breaking even. He was not charging enough, because he had never calculated all his costs into the price. He had been working an entire month for free without knowing it. That is what happens when you skip this step.

You do not need fancy software. Open a spreadsheet. List your fixed expenses, your variable expenses, your bank balances, and your incoming receivables. That single document tells you how long you can stay afloat.

Step 2: Check Your Inefficiencies

Once you know your vital signs, you need to identify every place your business is leaking money. There are four areas to look at.

Inefficient assets. Do you have equipment sitting idle that you could sell? When we were scaling our ice cream shops, we bought three or four machines in bulk at around ten thousand dollars each because the price was right. Those machines sat unused for almost two years. Meanwhile, we were stressed about cash flow during expansion and ended up taking a bank loan at an eight percent premium on thirty thousand dollars. We already had thirty thousand dollars worth of equipment collecting dust. Selling those machines would have covered the loan entirely and saved every dollar of that interest. Go through your space like you are running a garage sale. Idle equipment, spare furniture, extra smallwares: anything that is not actively generating revenue is a candidate to liquidate.

Cash burn rate. Once you know your fixed and variable expenses, you can calculate your monthly burn: how much you spend when revenue is zero. For my businesses during COVID-19, that number was twenty thousand dollars per month. Once you know your burn rate, you can answer the real question: how many months can you last? If the answer is two months, your decisions are urgent. If the answer is eight months, you have time to be strategic.

Excess subscriptions and services. As our business grew, we signed up for a lot of tools that were useful when we had a hundred staff members on payroll. When that number dropped, we were still paying for features we no longer needed. We cancelled or downgraded those subscriptions. It sounds small, but cutting a few hundred dollars per month across multiple services adds up fast. Audit every recurring charge on your business credit card and bank statement. Kill anything that is not essential to operations right now.

Lofty expansion plans. If you had a second location scoped out, a new menu category in development, or a renovation in progress, you need to pause and price that out honestly. Any capital going toward expansion is capital not available for survival. Shelf the expansion until your core business is generating stable cash flow again. You cannot grow your way out of a crisis if your foundation is crumbling.

Step 3: Find Your Funding Before You Need It

This is the mistake most operators make. They apply for funding when they are desperate, and desperate borrowers get the worst terms. They end up paying twenty percent interest on short-term loans because they waited too long and had no leverage.

The time to find funding is now, even if your account balance looks fine today.

Payment deferrals. If you have a mortgage on your property, call your lender today. During COVID-19, banks were willing to pause principal payments for up to six months, leaving borrowers paying interest only. That freed up significant cash flow every month. Even if you do not think you need the deferral, ask for it. You can always decline it. You cannot go back in time and ask for it after the crisis has already drained your reserves. The same logic applies to any other payment obligation: utilities, property tax, and especially rent. Call every single creditor and ask what deferral options exist.

Additional funding programs. There are banks, credit unions, and small business associations in most cities that specifically exist to support local operators. Identify them. Apply now. Getting approved for a credit line when your business looks healthy is straightforward. Getting approved when you are three months behind on rent is nearly impossible. You want the funding available and ready to deploy if you need it, not as a last resort.

The core principle. Cash flow is king. Whatever you can do to preserve cash and extend your runway, do it. A business that runs out of cash is done, regardless of how good the food is or how loyal the customer base is.

Step 4: Negotiate Hard with Suppliers

Your supplier relationships are a real lever during a crisis. Most operators treat these as fixed, formal arrangements. They are not. Suppliers want to keep your business. They are also dealing with reduced demand across their entire customer base, which means they have incentive to work with you.

Here is what to ask for. Request extended payment terms. If you are currently paying net-30, ask for net-60 or net-90. Ask whether they can reduce your minimum order quantities so you are not tying up cash in inventory you cannot turn fast enough. If you have been a reliable, long-standing customer, use that. Mention your history. Suppliers give better terms to customers they trust and want to keep.

Also audit your supplier relationships for anything redundant. If you are sourcing the same category from two different vendors, consolidate. Concentrating your volume with one supplier often gives you negotiating leverage you did not have before.

Be straightforward in these conversations. Most suppliers are small or mid-sized businesses dealing with the same environment you are. A direct, honest conversation about what you need almost always goes better than avoiding the topic until you are behind on invoices.

The Bottom Line

Ninety-five percent of restaurant operators do not have their vital signs written down anywhere. That means they are making survival decisions without data. Pull your cash balance, your receivables, your cash flow, and your fixed costs together in one place this week. Cut every expense that is not keeping the lights on and the food moving. Secure funding before the bank can see how bad things have gotten. And talk to your suppliers directly. The operators who survive a crisis are not always the ones with the best food or the most customers. They are the ones who know their numbers and act on them early.

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