Know When to Fold ‘Em: When Is It Time to Close Your Small Business?
There was a newly-opened men’s clothing store located in an affluent area I would drove by frequently when my son was nine-years-old. As we passed by, he would say, “Mom, there is the suit guy standing in his door way looking down the street again.” Often, we would catch the seemingly desperate business owner peering down the street as if hoping someone was on their way into his store. Alas, there was never anyone because he was located on a street with minimal foot traffic. The suit guy ultimately closed for good after a couple of years. The lesson here? Know when it is time to close your small business.
Even if you are not a fan of country music, you may have heard Kenny Rogers’ song titled, “The Gambler.” The song is about playing poker without losing your proverbial shirt, or as Rogers’ says “Know when to hold ’em. know when to fold ’em, know when to walk away, know when to run.” That advice is exactly what small business owners should be prepared to do. There are clear signs that show it is time to either seek help or flip off your lights for good.
When Is It Time to Close Your Small Business?
Opening a business is a great moment of pride. You hang your sign and tell everyone you know about your new venture. Unfortunately, it is that same pride that keeps a small business open far longer than it should be. How many times have you walked by an independently owned business or restaurant wondering “how the heck are they staying open?” You never see anyone going in or out, or maybe the business just always looks closed
Your Marketing Isn’t Working
If you are investing in marketing consistently and your business is still not popping – something is definitely amiss. Take time to either reassess your customer experience, get help to fix your problems or close up shop for good. If you find your marketing strategy is failing there could be something else wrong with your business. If you own a restaurant, maybe your food or menu isn’t as good as you thought. Perhaps your customer service is unacceptable. Maybe you have no parking, making it difficult for customers to patronize your business.
You Can’t Pay Employees
The inability to pay staff seems an obvious sign that it’s time to close shop, but many small business owners would rather drain a personal bank account then let go of staff – often citing the personal situations of staff for keeping them on payroll. If once or twice a year you pay employees out of your own pocket that is fine to fill in gaps due to change of season etc. But if it happens every month, it is time take action to increase revenue/reduce overhead, or decide if the business can be saved at all.
Employee Retention is Dismal
The cost of on-boarding new employees can eat away at your bottom line over time. If you are constantly managing employee changes it could be a sign of much larger issues. It’s not easy to be an employer and even more challenging to become an employer of choice. Poor training or lack of day-to-day operational procedures can lead to employee attrition. Consider taking a look at whether you can fix what is wrong or cut your losses.
Nobody Knows You Exist
It’s been over a year and you’re still hearing, “I had no idea this place was here.” People stumble in off the street by chance because they were in the neighborhood. Very few of your customers are patronizing your business with intent, which could be location related or perhaps your lack of a marketing strategy. Something has to give before you run out of money. Either ramp up your marketing budget to attract more customers/clients or consider relocating to a more high traffic environment. If resources are limited to do either of those, closing your doors for good may be the best option to avoid losing everything you ever worked for. Customers unable to find your establishment is a problem that likely won’t cure itself.
Take Action Now
According to the Bureau of Labor Statistics’ Business Employment Dynamics, about 20 percent of small businesses fail in their first year, and 50 percent fail in their fifth year. Getting over the five-year hump is a goal every startup should strive for, but without totally draining personal bank accounts. Every small business needs a capital infusion of some kind to get off the ground, which comes from investors, loans, or personal assets. If you have been open a year or more and every month you are paying operating costs with personal cash reserves, it is definitely time to make a difficult decision to be proactive, to improve, or close.
If you are struggling to keep your business afloat, seek help. Check the website for America’s Small Business Development Centers to find a center near you to access no-cost business counseling and other resources which may help you turnaround your business. You can also consider hiring a business consultant if it is convenient for you.
Remember, there is nothing wrong with seeking help or admitting that your business is failing. Let go of that pride and do something to fix what is wrong.
Black Enterprise Contributors Network