Have you been making a series of losses in your business? Has it reached the point where you are seriously contemplating closing the business down? Would you like to know how certain you should be before closing down a business? If your answers to these questions are yes, then this article is for you.
You need to be very certain before you make this decision. Don’t be too hasty to close the business. You don’t know if small business loans can boost your ailing business. If finances are the problem, you can use small business loans to improve the business and get it unstuck.
On the other hand, you don’t want to waste too much money on a business that cannot be revived. Therefore, you need to make the strategic decision to close the business at the right time. Closing a business at the right time will save you a lot of money and unnecessary stress. This article will let you know the possible reasons to close down your business, along with other things that you should do before and after closing your business.
Viable reasons for closing a business
The following are some common reasons why entrepreneurs close their businesses.
1. Inability to attain milestones
Another key reason why businesses shut down is when they cannot achieve specified growth milestones and metrics. At that point, the owner may feel that there is no point in keeping the business going. But you need to be sure that you aren’t too hard on yourself and your business by setting unattainable milestones.
Related: 22 Questions to Ask Yourself Before Making Your Next Big Life Decision
2. Lack of customers
Customers are the lifeline of a business, and if your business doesn’t have enough customers or is losing them too fast, you might have no choice but to close the business. Find out why you aren’t getting enough customers and do all you can to fix this. But if you can’t win enough customers to sustain the business, it might be time to count your losses.
3. Bad economic situation
A lot of businesses get closed during a recession and other periods of economic downturn. So, suppose there is a recession or change of government with bad policies in a location, and you don’t see things changing anytime soon. In that case, it might be prudent for you to close your business down. You can then reopen it after the bad economy, or political climate is over.
4. Expert analysis, financial data, and models show that you should close the business.
Statistics, trend charts, expert analysis can show the future of a business and let you know if you should close the business or not. The statistics don’t lie, and they don’t show any bias, unlike humans. So, pay close attention to your business finance and monitor everything carefully. Watch what the figures say and listen to the experts.
5. Terrible and worsening business debt
Many businesses have had to source for external funding to stay afloat, expand, buy equipment, meet urgent cash needs, and use cases. But it could get to a time when business debts pile up and become unsustainable. In such cases, the business often files for bankruptcy, assets are liquidated, and the business owners look for a way to pay up creditors after selling business assets.
If you are running a business that is an eternal sinkhole consuming business funds day after day with no sign of improvement, selling the business might be better for you. The thing is, the more funds you sink into the non-performing business, the more you lose, and in the end, you might find yourself with more debts and nothing to show for it.
6. Improve your failing business first to avoid closing it prematurely.
As a businessperson, you shouldn’t run at the first sign of trouble. Many successful multinational corporations you see today had issues that the founders withstood on their way to becoming billion-dollar companies. You need to try some things to get your business out of danger before pulling the plug. Here are a few things that you should do to improve a failing business
7. Seek business funding
Small business loans and other funding sources might be the trick to getting your business unstuck. If you lack money to expand and carry out worthwhile business initiatives, seek business funding.
8. Get the help of a consultant.
Consultants are good at thinking outside the box and reviving failing businesses. They bring along a wealth of experience with them and can bring your business out of the quagmire. They can come up with fantastic solutions that will bring your business back to life in no time.
Key things to do before closing down a business
After making the key decision to shut down a business, certain things must be done. Here is a quick guide for that.
1. Settle your outstanding debts and taxes
Settle your rent, taxes, insurance debts, loans, etc. Cancel any permit and business subscription that you do not need and clear all paperwork. A lawyer might come in handy here.
2. Notify your Suppliers two months before
Two months or so before you decide to close down your business, you should notify your suppliers. Many suppliers place orders for goods from manufacturers months ahead and spend a lot of money on logistics. Informing your suppliers ahead gives them leeway and helps both of you to close your relationship on a beautiful note and not suddenly. You can also resume the relationship should you decide to resuscitate the business again.
3. Inform your employees three months before
You should inform your employees a few months before so that they can start looking for new places of employment. They depend on your business for their livelihood. It is unfair for you to suddenly leave them out of employment.
4. Inform your customers and clients two weeks before
This applies more to service-based businesses than product-based B2C (business to consumer) businesses. If you supply important services to people, it is only fair to let them know that you won’t be available after some time so they can look for alternatives.
Ensure that you end your business relationship with everyone on good terms, so if you decide to restart the business, you won’t lose any business pedigree. Update your social media platforms to notify people. Have physical signs on your business premises if possible.
How to start over after closing a business?
Now that you’ve closed the business. All hope is not lost. You deserve a fresh start. You can take a quick vacation to clear your mind and refresh yourself for the next phase. After your break, you can take up paid employment via a job or freelancing, or consulting. You can also decide to start another business. You might need small business loans for this. The choice is yours. Just take your time before making a decision and stick with it.
Closing down a business is not the end of the world. On the contrary, it could be the beginning of greater things for you. You just need to be very certain about your reasons for closing the business down. Don’t just close a business down due to the frustration that every entrepreneur faces at the early stages of a business. Follow the procedures in this article, and you’ll be sure to do the right thing before and after closing a business.