It may seem strange to read a blog about closing a business from a restructuring firm that writes repeatedly about saving businesses. But there are several reasons to close, sometimes even a reasonably successful business.
What would be some of the reasons for closing a successful business?
Maybe it’s a family owned and operated business and there is no member of the family that wants to tie their life to the business.
Well, you can always sell the business, but often that sale leaves you or some of your family tied to the business for a period or, during the sale process, the business begins to decline due to the pending change of ownership.
A VERY HARD DECISION …
The decision to close a business can be a hard one, even if the day-to-day work is nothing like what you imagined to be, or your initial goals seem even further away.
Many business owners hold on for too long, simply because they don’t want to close the doors and officially admit failure.
But having the courage to admit that things are not working out sooner rather that later can insure a transition to a more successful future endeavor.
HOW TO DECIDE?
How to make such a decision? There are several clues that it may be time to call it quits.
1. You’re out of money.
If you’re out of cash, think hard before racking up debt to continue with the enterprise.
If you have debt such as a credit line or equipment loan, think two or three times about taking on more debt.
There are business “payday loans” for almost any business.
But not being able to pay current debt and then throwing good money after bad is a certain way to limit the success of any future transition.
2. You’re not meeting your goals after several years.
When you started your business, you likely had a reasonably clear vision of what success would look like.
While it can often take longer than expected to hit true viability, if you have yet to hit your minimum numbers after several years, it may be time to explore other opportunities.
3. You’ve pivoted half a dozen times and have yet to truly take off.
In many cases, business models change as new businesses enter the marketplace.
But if you’ve tried several iterations on your offerings and aren’t finding many takers, continuing to pivot may just be putting off the inevitable.
4. You’ve tried many marketing avenues but haven’t gotten traction.
Most businesses have one or two marketing channels that are a natural fit.
You can tell when you’ve found a good fit when attracting a good volume of customers feels relatively straightforward, and you are generating profit.
If you’ve tried upwards of a dozen likely channels and are still not connecting, it may be time to throw in the towel.
5. Your competitors are outpacing you.
If your niche is dominated by two or three strong entrants who are growing at a rapid pace, and you’re having a hard time differentiating your offerings in a meaningful way, you may have a hard time ever capturing enough market share.
6. You’ve realized that your view of the market was flawed.
It’s impossible to have a perfect view of the market opportunity for a given business until you leap in and start testing your assumptions.
Sometimes it quickly becomes clear that some aspect of your business plan doesn’t reflect reality and you’re unlikely to be able to profitably scale your business.
7. You’re spending most of your time doing stuff you don’t like.
Most new business owners have a skill-set or a product that they just can’t wait to unleash upon the world.
Unfortunately, the reality, especially when a business is struggling, is that owners often spend more time dealing with ailing balance sheets than doing the activities they most enjoy and are best suited for.
8. Your customers and the market aren’t talking about your product or service.
Not every customer will be a diehard fan of your business, but if you’re not generating any word of mouth online or off, you may be in trouble.
9. You no longer want to tell others what you do.
When you’re excited about an idea, it can be hard to contain your enthusiasm.
You may find yourself leading all conversations back to exciting adventures that you’re having with a successful business.
When you no longer truly believe in what you’re doing, the opposite will probably be true-you’ll find any excuse to turn the conversation away from talk of your business.
There are any number of other clues that it’s time to let go, but when you feel relief at the thought of not having to support your business and when you start thinking more about making that transition than about saving the business, it is definitely time to exit.
Revitalization Partners is a Northwest business advisory and restructuring management firm with a demonstrated track record of achieving the best possible outcomes for our clients. And now, we’ve written a book to help our readers understand the issues facing their businesses. You can find this compilation of our business thoughts at: https://revitalizationpartners.com/we-could-write-a-book/ or on Amazon.
We specialize in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations.
Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.
