Are you considering closing your business and just walking away?
Deciding on whether to close a business can be hard to do. You put countless hours of time and effort into starting and running your company, so it’s understandable to have complicated feelings when it doesn’t go to plan. Do you make big changes, stay strong, and carry on? Or close your business and walk away?
You’re not passionate anymore
It’s obvious when someone doesn’t care about their business because they let it go. More often than not, everyone around can tell the owner doesn’t care anymore. It’s not just their words and facial expressions, but their actions. Partners and employees are often able to pinpoint particulars that could be improved with just a bit of care and attention. If you have to drag yourself out of bed in the morning and running your business is a chore, you need to move on.
You’re bleeding money
If you’re bleeding money, don’t only hold on because of what psychologist’s call “sunk cost bias”, the tendency for people to continue investing in a losing venture because of what it’s already cost us. Our judgement can be clouded, like a losing gambler that just can’t quit. It’s hard to admit we’ve wasted money, effort and time that could have been better spent elsewhere. Rather than focusing on our past investments, it’s important to consider our present and future costs and benefits so that we can make decisions that are in our best interests.
Times have changed
Is your industry being disrupted? Is your business model running out of gas? If you’re up against shifts in technology or regulation, you’re going to face new kinds of competition. Consider the restaurant industry, having to adapt to COVID-19 regulations and changing habits of their clientele. Most saw an immediate drop in sales as customers stayed at home, and many were made to close temporarily during lockdowns. Some restaurant operators quickly shifted their energies to updating their websites to include online ordering so that they could retain their customers by supplying their meals for curbside pickup and delivery. As a business owner, you either cater to consumers’ evolving needs and preferences or you don’t. If the times are changing, you’re not passionate anymore, and you’re bleeding money, it’s time to pack it up.
Failure is a part of business. Very few entrepreneurs ever make it big without first experiencing some massive failures. In Canada, 20 percent of businesses fail in their first year and around 60 percent go bust within their first three years.The reasons businesses fail is due to a variety of reasons, including:
- because they ran out of cash
- because of poor marketing
- because they were outcompeted
- because of pricing and cost issues
- because they lacked a business model
- because they ignored their customers
- because there’s no market need for their services or products
The failure rate gives you an idea of how and when businesses tend to fail. If we assume a 20 percent possibility of failure in the first year, it’s a smart idea to distribute our investments and our time accordingly, as we need to balance the level of risk we’re comfortable taking in order to protect us in the event of failure.
Although the majority of our clients start as a creative freelancer/sole proprietor until they earn enough profit to use incorporation as a tax advantage, we know of owners of private corporations who are not making enough income to justify a corporation and decide to become a sole proprietor again. Sometimes, a creative entrepreneur decides that the unpredictable nature of “going it alone” is too stressful. They decide that they no longer want to be self employed and would rather enjoy their craft on their own time and take up a no risk, steady paycheck.
Before you get so frustrated you decide to just close up and walk away, consider your options:
- Talk to a business coach, talk to your bookkeeper and accountant, talk to your lawyer, and your customers. Do they have information that would lead you to make different decisions? Be sure you’re not getting only information that confirms your pre-existing assumptions. Seek out unfiltered feedback by talking to customers directly to really understand the experiences they go through. Conduct your own version of Undercover Boss.
- Take on a business partner. If you’re a creative type, you may just need a strong business-savvy partner and/or someone who can do sales, to balance you out. Put your efforts into finding a good team and leverage them.
- Find someone to take over your business. Make sure you accurately value all assets tied to your small business. This includes intangible assets like brand presence, intellectual property, and customer lists.
- If you’re in debt, introduce someone to your customers to get a commission on any future sales, prepare an inventory and sell any and all assets. Just because something doesn’t seem to be an asset to you doesn’t mean it’s not a value to others. Look around to find who it’s valuable to.
Take a week off, reflect on the past and what you’ve learned. Also, think about what makes you happy. Even if you’ve “failed” at this particular business venture, you have learned enough to start a different type of business, albeit one that doesn’t come with the same risks. Take the time to flesh out a quality business plan for a clear path forward to significantly increase your likelihood of success. If you decide that being an entrepreneur isn’t for you anymore, know that having a stint as a small business owner might make you stand out to an employer.
Whether the causes are financial, emotional, industry changes or otherwise, it’s smart to know when it’s time to call it quits. It can be agonizing to acknowledge that your business is no longer serving you. Don’t think that your initial decision was a mistake. Not at all. Think of it as a learning opportunity, as we often learn way more from the choices that don’t generate the outcomes we want, than from the choices that do.
Almost every successful entrepreneur has failed at least once, in fact many of the most successful have failed several times. The most successful people aren’t those who never make mistakes; they are those who are quick to admit when they do. As serial entrepreneur Richard Branson (remember Virgin Cola or Virgin Cosmetics?) was famously quoted as saying, “don’t be embarrassed by your failures, but learn from them and start again.”