Sometimes, owning a small business forces you to have a tough conversation with your family.
For example, suppose your wife owns a small business that she has been struggling with for several years. She loves her job and is motivated to get rid of these financial struggles, but the decline of her business has hurt the financial situation of her family. You and your wife have two children at home, and to make matters worse, your annual salary is $70,000.
At some point, you start to realize that you have too much money and you have accumulated a troubled business. Although your wife is aware of the financial struggle, this can be difficult for someone who is passionate about her own small business but needs to see the writing on the wall.
According to the Small Business Administration (SBA), there are approximately 33 million small businesses in the United States as of 2023. The Bureau of Labor Statistics reported last year that only about 35% of small businesses established in 2013 are still in operation for 10 years.
Over the past decade, many small business owners have had to make tough decisions and your wife seems to be on the same track. Starting a small business can be tough, but knowing when to unplug when things are going well can be even harder.
You and your wife seem destined to have a difficult conversation, but it is important to carefully evaluate the situation before both of you decide what to do next.
A small struggling business is not automatically exceeding hope, it is important to carefully study the financial situation of the business and the financial situation of your family to see if the situation can be saved.
One of the most important things to do is to summarize the profit and loss statement for the business to see how much it is losing. Meanwhile, add up the costs of running a business to clearly understand the revenue needed to break and/or make a profit every month.
It is also important to build a family budget and add the business as a expense as an increase in expense rather than making money. And, try to figure out what the business is losing you more than the dollar amount.
For example, suppose you charge $1,000 per month to your wife’s business and get only $400 in return. Losing $600 per month, which is $600 you don't invest 401(k) or other retirement savings accounts. And, if you deposit $1,000 into your wife’s credit card, that’s your $600 monthly credit card debt that you have to pay off with your own money.
It is important to understand that you and your wife are giving up to keep the business going.
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The SBA reported that between 1994 and 2020, about 68% of small businesses reached two years. This means that about one-third of the fold is folded over that time range. In addition, only about 49% of small businesses have reached five years.
At the same time, today’s economic environment brings new list of challenges for small businesses, as the combination of lingering inflation and high interest rates can make it even more difficult for many small businesses to thrive.
Goldman Sachs data shows that only 69% of small businesses are optimistic about their financial paths. Meanwhile, 53% of small businesses are unable to take out loans to keep their operations flowing due to current interest rates.
If your small business has been stagnant, you may want to consider folding it, given the current economic uncertainty. A late April poll showed that 72% of Americans now say there could be a recent recession and a widespread economic downturn could hurt your business even more.
Of course, saying goodbye to your passionate adventure is not easy, but there may be some signs that can help you realize when to let go.
First, if your family is paying a month now because you are funding a loss-making business, that's enough to keep going. Not making money is one thing, but seeing your personal financial situation deteriorates is another.
Second, if your struggling business prevents your family from achieving their financial goals, that is another reason to quit. If you spend so much money on your business that you are not saving money for retirement, kids’ college or down payments on your home, etc., it may be time to close the store.
Also, if business is the root of marriage conflict, then it is time to let the business think seriously. The pressure of failing business can easily cause marital conflicts and you don’t want things to get to the point where your relationship begins to collapse.
Finally, if you don’t see a clear path to profitability, it’s time to give your business a break. This is especially true if the business has been struggling for four years and you have time to try to solve the growing pain.
But remember that closing a small business won’t fail you. It takes courage to start a business, and sometimes even great ideas don’t solve the reasons outside of your control.
Instead of focusing on the negative impact of closing the business, focus on the positive aspects. Now you have the opportunity to move the possibility to a new career and use the skills and experience you develop as a business owner to achieve different roles. In addition, after years of struggle, having something to say can ensure a stable salary.
Also, remember that if your financial situation changes, you may be in a position where you can start another business in the future.
Once your household income rises or reaches certain savings goals, you can take this opportunity to work in a new business. But if your family needs money the most at the moment, you may have to give up on your favorite business to address pressing needs.
This article provides information only and should not be construed as advice. It is without any warranty of any kind.
