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How to Close a Small Business - A Personal Experience - Part 1: The Decision
This article is an on going series on how my wife and I went about closing our small business. It based on our research and experience and is intended to show what we faced and how we handled the hundreds of decisions along the way. It is not intended to provide legal or tax advice, and you should always consult your own professionals. By sharing what we experienced, we hope our experience can make this part of owning a small business easier for others . We hope to share both the factual and emotional ups and downs along the way.
Part 1 - The Decision to Close
If your small business was like ours, you started the venture in your life with high hopes and expectations. Along the way as you ran your business you put a lot of yourselves into it. Hard work, long hours and built personal relationships with your customers, vendors and employees. The decision to close is never one taken lightly and its hard to not feel like a failure. We went through these same feelings but realized we wanted to close our business they way we ran it, honestly and with our dignity intact. We realize our situation is different than many others and thanks to having one full time job (and eventually two) we had income outside our business to keep us going and enable us to close things down in an orderly fashion.
We started out about 4 years ago. My wife and I both worked for a great company but felt we wanted to put our efforts into something we could own and grow. My wife became very interested in a concept called "Meal Assembly" and we spent several months investigating the concept and understanding how we could open our own business. We looked at opening our own version and looked at the franchise route, at the time several new franchises were expanding across the country. We actually took almost a year to make the big jump and start down the small business owner path. We researched franchise opportunities and found a company that was growing and we felt was the best fit for us.
The best part of this enterprise turned out to be the planning and opening of our business. It was a new adventure and very fun and exciting. My wife and I were full of hope for our new endeavor.
At the time we thought we did proper due diligence, researched the industry, interviewed existing owners in the industry. In hindsight, given how new the whole meal assembly business was, we did not understand the full risks and that these franchised business models were never really proven.
Since this article is not about opening or running a business we will fast forward a few years. We had successfully opened our franchise business and the first year was pretty good. We were not profitable but at times close to break even. The trends were still very positive in our business with growing revenues but we started to see the first stresses in the Industry. Several franchises within our company and across the industry started failing. At first we thought these to be isolated cases and not an industry trend.
After some time, we saw the initial excitement of our customers begin to wane. Our repeat customers started slowing down. Initially new customer were coming to replace some of our earlier ones but we were seeing signs of customer fatigue with our business. We had a very strong core group of customers but could never seem to build this base to keep our business at break even. During the second year, the economy took a turn into our current recession and business began to slow down even more. We tried all sorts of methods to keep our customers coming. Grass roots advertising, print advertising, radio ads, coupons, etc... We tried different in store specials and kept in touch with our customer base via email but we could not seem to stem the tide. We were losing money and it was accelerating.
Each month as we added money into the business we kept up our hopes. It was not always easy, but through it all my wife and I did not let the business get between us. We were in it together and although some days were tough we really worked hard together to make things work.
There was not a single event or date that past when we decided that it was time to close the store. It happened over time and as we set milestones to try to turn things around and things did not change we knew it was eventually inevitable. About 6 months ago we passed the point were our monthly support was more than our lease payments. About that time my wife was lucky enough to get back to work with her old employer. On a single salary alone we were not going to be able to support things. A few months later we were putting in more money than the business was earning in revenue!
At that point, after listing the business for sale with no interest, our only real choice was to close. It took use a few more months for this idea to become a reality and for us to kick into gear and plan our closeout process. Some of this was the feeling of somehow failing, some of it was the uncertainty of how to close a business, but it was a process we had to go through. Everyone is different and we hope you don't have to come to this point in your own endeavors. If you find yourselves in a similar situation, your are not alone.
The good news is once you make this mental step and decide the next step is closing there is a sense of relief. Things do get better, it may take time.
In our case, the good news is we had some source of income to keep us going financially as we closed. Not everyone has this luxury.
We set two goals for ourselves in closing our business. If at all possible we wanted to avoid personal bankruptcy and we want to give our employees time to find other work.
What's Next: Part 2 - The Research and Planning
The next part of this article will cover our research and planning. Closing the business is a project like opening it was. It requires a lot more effort than first thought. There also seems to be tons of information online on opening and running businesses, but not much useful information on closing. We hope to provide some more insight to others in this area as we continue this series of articles.
Related Links on the Web
- How to Close a Small Business - A Personal Experience - Part 2: The Research
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