Many people dream of launching their own business. Some start small, with a side gig or moonlighting on top of their full-time job. Others jump right into launching their own company. Regardless of the business type, surviving can be difficult. According to the Small Business Administration, 50 percent of new small businesses close within five years of opening.
However, it’s hard to know when to shut down when you’ve poured your heart and soul into a business. Making a smart, objective decision can be compromised by the passion you have for your company and the thought of the money and time you invested. Having a list of concrete indicators can help you make a wise choice.
Here are five clear signs it’s time to make the difficult decision to close.
1. There’s no more profitability
It can take a while for a small business to break even, let alone turn a profit. But while you should expect some time to ramp up your clientele, your business should show progress and eventual profitability. Otherwise, you’ll be unable to pay your bills, buy inventory, or afford basic essentials.
If you’ve been working around the clock and cannot get in the black month after month, it may be time to reconsider your business model and sustainability.
2. You cannot take a large enough salary
Many entrepreneurs forgo paying themselves to help their business grow and succeed. The expectation is that after a year or two, they can start taking a salary. In the meantime, they have to live off their savings or rely on credit cards to fill the gap.
That’s a dangerous game to play for too long. Going without pay — or working for less than minimum wage with a side gig — can cause you to go into debt and give a false sense that your business is doing well.
3. The market changed
While your side hustle or business idea may have been successful for the first few months or even years, the market can change. What was a hot business can cool down quickly as time goes by.
For example, driving for ride-share services was a great way to make extra money. Some drivers found it so lucrative they quit their jobs to drive full-time. However, there’s been more competition in the industry, and companies like Uber and Lyft have cut drivers’ rates to attract new customers. That can make it more difficult to make money, and many are making a fraction of what they used to.
If you see your earnings decline continually, don’t hold onto hope for a recovery for too long. It’s better to cut your losses and pursue something else than to be overly optimistic about a return to form.
4. You no longer enjoy it
When you first started your business or side gig, it may have consumed and fulfilled you. But while working on a passion project on a part-time basis can be enjoyable, it can change when you devote more of your time to it or make it a full-time endeavor.
Work can start feeling more like a drag than fun. If you go to work every day dreading what’s to come, consider shutting down to give yourself the freedom to start elsewhere.
5. It’s just not worth your time
Make sure to calculate how much you need to earn (and not just to pay your bills) for your small business to be worth your time. If you’re working 20 hours a week, but making just a couple bucks an hour, it may be a better idea to invest your time in another business or just enjoy your hobbies.
Closing a business
Shutting down a business of any kind can be hard. Whether you invested $100,000 to launch a restaurant or just $500 to start an online craft store, you likely feel very passionately about your work. The idea of closing it and admitting defeat can be difficult. But doing so can save you thousands over time, and free you to pursue a new career or side business you enjoy.