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Signs You Should Close Your Struggling Business
Written by Marissa B. on May 25th, 2021

Say! Yes Enterprises works hard to educate business owners and investors about valuations.

It is an unfortunate fact that businesses are not infallible. Even the savviest of entrepreneurs are not immune to the ebbs and flows of markets and consumer demand. When money begins to flow out of the business faster than it comes in, business owners must consider closing down or going into bankruptcy.

Say Yes! Enterprises does not handle bankruptcies or business turnarounds. In the past, SYE founder Christopher Wick has had to make the painful decision to close a business. SYE comes across struggling business owners on a regular basis. Wick and his team have plenty of insights to share.

Should You Sell a Struggling Business?

Sometimes entrepreneurs use selling their business as a final attempt to salvage it. An acquisition may seem like a way to keep employees working and mitigate personal losses for the business owner. This is often not in the best interest of a business owner.

Most investors are seeking opportunities for their money to grow with as little effort as possible. The prospect of buying a business with serious problems means the investor will either have to spend time fixing the business or spend money hiring someone else to. The poor state of affairs causes the business to have a lower valuation.

Due to the urgency of the sale, potential investors have far more leverage than the business owner. In this unbalanced situation of power, an investor can take advantage of a business owner’s plight. The business owner may be able to sell a business but will often walk away with less money than deserved.

When (and Where) to Seek Help

Unfortunately, SYE cannot do much in the situation of a fire sale or a business that is on the brink of bankruptcy. SYE can however help if a business is earlier in the process. When it comes to closing or thinking about closing a business, everything is time-sensitive. Often, the business owner is the person most aware of the trends and cycles within the business.
While there are some outliers, the need to close a business often does not arise in a day or a month. Business owners start to recognize signs much earlier, often six months to a year before action is needed. When a business owner takes heed of these signs, there is more opportunity to make a wise decision. SYE wants business owners to have as much time and options as possible. Even in the case of a struggling business, a positive exit is possible.
In some situations, the business may not need to close. A growth consultant, business coach, or financial advisor may be a great resource for helping a business overcome an issue. It could be a disruptor in the marketplace or a change among consumer tastes. When there is an identifiable problem behind the negative results, there may be hope. SYE has a Growth Acquisition Partnership program to help businesses that have one or two major problems that need fixing. 

While there are options, most business owners can tell when it is time to close. What are some of the signs to watch out for?

When to Close a Business

The first sign of a struggling business is one that only the owner can see. A business should be a two-way street. The owner serves the business, and the business serves the owner. If things become one side, where the owner is serving the business and getting nothing in return, that is a major red flag. No one goes into business dreaming of 80 hour work weeks. If a business starts stealing time from other important matters, that is a sign of a dangerous imbalance.

Every business has cycles. Some businesses are slow in the winter and busy in the summer. Others have low sales on certain days of the week. Over time, a business owner starts to understand the normal cycle of business. When slow periods start to lengthen or fall outside of these usual dips, this is a sign that revenue is not sustainable. Perhaps, the business has lost key clients that make up a large portion of the revenue. Has a major demographic group of customers stopped using the business' products or services?

Business owners are abreast of what is going on in their industries. Are there disruptors popping up that could threaten the long-term success of your business? Can you compete with those disruptors, or will they force you to close?

If the other signs are not heeded, there is one that is impossible to ignore—finances. When paying bills and payroll becomes difficult or even questionable, it is time to consider the best way of closing. If the business's credit card balance is higher than the balance of the operating account, take decisive action.

What If…

Even in dire straits, business owners have plenty of options. There are many models of business ownership, financing, and even bankruptcy. There are 101 ways to keep a dying business on life support.

Many well-intentioned entrepreneurs fall into the trap of thinking that the current poor state of the business will improve. They take out loans and open up new lines of credit to keep the business going until things get better. Is this a wise course?

Before committing to that level of financial obligation, give yourself the honest answers to these questions:

Is this really worth it?
Do I want to keep doing this?
If the business has been in dire straits before, was it because of me, the business, or market conditions?
What will be different this time?
Do I have a viable plan to prevent the business from falling into the same problems?

Closing a business is a choice. If a business owner is considering closing, it is often the right choice. Closing is not a failure. There is no success or failure in business. There are only outcomes. The only truths are what happened and what resulted from those decisions.

Give yourself the honor of having a reality check, head check, and heart check. Before committing to another obligation, have a moment of authenticity with yourself.

Some business owners who are honest with themselves find that they do not want to continue. There may be methods for saving the business, but there is no obligation to pursue those methods. If a business has stopped serving you and is instead stealing from your time, your life, and your sanity, closing may be the best option.

How to Close a Business

Start by having conversations with the right professionals. There are financial and legal steps to closing a business. A bankruptcy lawyer, tax lawyer, or CPA may be the right person to give advice on the proper way to exit a struggling business.

The process will take an emotional toll. Passionate entrepreneurs want to see their businesses thrive, and they care about the lives the business touches. Mitigate the emotional toll by creating a checklist.

Give each task on the list a date. There will be a day for settling accounts with vendors. There will be a day for closing bank accounts. There will also be a day for letting go of staff. The checklist helps with organization. It also helps the business owner to stay mentally prepared for the painful tasks that go into closing up shop.

Concern over the negative impact that closing will have on employees, customers, and vendors is a very real one. Rest assured, that employees likely already recognize that the business is in a dire situation. Others see when business owners are running themselves ragged to keep a business going.

For employees of a struggling business, getting notification that the business will close often comes with a sense of relief. Things have looked bad for some time. Now, they know the full extent of the situation and they know what they need to do to move forward.

Concern for others is all the more reason to be authentic and transparent about the decision to close. All involved will be much better off if the business closes when there is still money to pay bills and payroll.

Do not allow sentimentality to cloud judgment. Closing is a method of divesting the business owner and all other passengers from a sinking ship. As a captain, be resolute and prompt with your actions. In many cases, closing a business can be the kindest thing to do.

Stress is lethal. Closing a business that has been on the brink is often an act of self-preservation, albeit a difficult one, on the part of the business owner. Entrepreneurs often put themselves through struggles on behalf of the business that they would never ask an employee to go through. Respect yourself enough to know when to admit that the business is no longer working.

What's Next?

Closing a business can be a liberating relief. There is so much stress that comes from making the decision and executing it. The finality of the choice is freeing.

After closing a business, the possibilities are endless. Some find freedom in leaving entrepreneurship altogether. Others close one bad venture and immediately enter into a new one that is more fulfilling. Many entrepreneurs may end one business in bankruptcy and immediately open up a similar one. (link to Christopher’s story of the failed salon)

Several of the most celebrated entrepreneurs in society have had businesses crash and burn. They dusted themselves off and went on to greatness. One failed business does not make an entrepreneur a business failure.

Thomas Edison tried 1,000 times to make a lightbulb before he invented the one that worked. Being in the proverbial trenches of a business that does not work can give an entrepreneur the right insight to build a business that does work.

Each entrepreneur has the opportunity to define his or her own future. The possibilities are endless.

A Final Note

“The one thing that advisors may not tell you is how to take care of yourself through an experience like that, and how to use that moment to find yourself. You get to define how closing your business reflects on you… I want you to learn from your failures, and I want you to stop the bleeding.”—SYE Founder Christopher Wick

About Say Yes! Enterprises

Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
About Christopher Wick
Investor, 9X Award-Winning Entrepreneur, and 5X Best-Selling Author & Speaker

*Founder/Principal of businesses that have been featured by Huffington Post, ABC, NBC and Wall Street Select*

Christopher Wick is an award-winning entrepreneur who has built, bought and sold various companies relating to social media marketing, e-commerce, real estate, retail and investing.

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Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
CONTACT 
Say Yes! Enterprises
5900 Balcones Drive
STE 100 
Austin, TX 78731
Copyright © 2020 Say Yes! Enterprises | All Rights Reserved. 
Copyright © 2020 Say Yes! Enterprises | All Rights Reserved. 
ABOUT 
ABOUT 
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
Say Yes! Enterprises is an investment management company that acquires, builds, and sells companies that benefit shareholders, customers, team members and communities at large.
CONTACT 
CONTACT 
Say Yes! Enterprises
5900 Balcones Drive, STE 100, Austin, TX 78731
Say Yes! Enterprises
5900 Balcones Drive, STE 100, Austin, TX 78731
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