There comes a time in every small business owner's life when they have to decide if it's time to go bigger or close up entirely. For the small business owners who have been hard hit by Hurricane Sandy, the tough economy or both, the decision can be a very difficult one. My small town on Maryland's Eastern Shore was already struggling with the challenges of a declining seafood industry and the hard economic times when the storm hit and we were especially impacted by the hurricane. Many people in our little community have lost their homes and are faced with huge repairs while the business owners are being forced to close up.
One of the mainstays of our town is Riggin's, a small, family-owned grocery store. The store has been in business since the mid 1940's and in spite of the changing times, it is one of only two grocery stores within 20 miles. When a large grocery chain came to town, the smaller store had a tough time staying in business, but they were committed to keeping the doors open. Unfortunately, Hurricane Sandy blew through town, causing a tremendous amount of damage and flooding to their store. Faced with the options of rebuilding or closing, they have decided to close. It is a tough blow to our community and leaves us with only one grocery store.
So, how do you know when it's time to close up or double down? To help with the decision, Warman Capital offers an infographic that breaks things down:
As you can see, small businesses have a very limited life span. Although they are responsible for hiring 60% of the workforce, most small businesses only stay small for about 10 years. After that, they either grow into large businesses or they go under. The biggest challenge is that once your business is successful, you can't rest and maintain your profits. You have to constantly stay ahead of the competition - and that means growing to meet the demand instead of becoming irrelevant.
Occasionally, when the business is doing well, there will be offers to buy it. The problem is that most small business owners are reluctant to sell something that they have put so much energy into. However, if the buy out offer is more than you would make in two years, it's probably a good idea to sell and invest your money and energy into a new business.
When your business is losing money on a regular basis, as hard a decision as it may be, it's probably time to cut your losses and avoid getting deeper into debt. Although it's a bitter pill to swallow, it can be the best choice.
Over the past 10 years, small businesses have faced increased challenges and have had difficulty surviving. When small businesses go under, they can have a huge negative impact on their communities. People lose jobs and foreclosure rates go up, making it even tougher to get new business loans, which limits the number of new businesses.
It's a sad day for any community when businesses close, but there comes a point when you have to decide if it's time to go big - or just go home.
Have you ever owned a small business? What happened? Please share your thoughts in the comments.
Infographic source: Warman Capital