The business I own has specialized in selling used restaurant equipment for over 30 years. The majority of the equipment comes from closed restaurants, many of which are individually owned. The restaurant business has always had a high failure rate, especially among non-franchised units. Just this week I spent some time with an owner who had closed one location due to financial hardship and was closing the second location that had been open nearly 10 years because of the hardship of the failed location.
There are multiple reasons why restaurants have such a high failure rate, but it rarely has anything to do with the food. Sometimes it does, but not most of the time. Usually, people get in the restaurant business because they have some talent for cooking or baking. The problems usually arise from some other area such as people or money management or undercapitalization. Every time I see someone closing their business it breaks my heart because I know there are many things that are going on in that person’s mind and life. They are experiencing a wide range of emotions. I want to share with you some of the reasons why it is so tough on them. Hopefully, they will help you relate to someone the next time you see them going through a business closure.
It Is Who They Are
Small business owners spend an enormous amount of hours starting and running a business. It becomes their life. Often it becomes their identity. Not just internally, but it is often how people recognize them in a community. When that business closes, there is a certain loss of identity. They are often struggling to figure out what comes next and wondering what people will think of them now. Almost every business owner who closes a business will go through a period of grief where they are mourning the loss of not just a business, but a major portion of their life.
They May Have Lost Everything
It is not uncommon for business owners to invest everything they have to start a new business. I recall in the late ’80s when I was first starting out and was working with a customer who was starting a muffin shop in Chapel Hill, NC. This was way before there were so many specialty dessert shops. He invested everything he had to open this business including all of his retirement savings. He spent nearly $500,000 to open this fancy little muffin shop only to see it fail in less than one year. He did not just lose his business, he lost everything including his home and his retirement. Business owners are heavily invested in their operation. If it is not successful, it can be financially devastating.
They May Spend Years Paying Back
Not only is it possible to lose everything in a business closure, but it is also possible to be liable for the debt that has been incurred which may take years to repay. After closing the business, many business owners take a job just to pay back the money they have borrowed. Just because a business is closed does not mean the owner is finished with their responsibility.
They Are Embarrassed
No one likes to fail. You do not start a business to see it close. You start it to be successful. When things do not work out as you planned, there is a certain level of embarrassment. That owner is concerned about what people will think of them. This often takes time to overcome. We all want to succeed and when we don’t, the embarrassment can be overwhelming.
There is a false assumption that business owners have it made. Rarely is that the case. Usually, any freedom or benefits they have is because they have invested their entire life into that business. The next time you see a business close or fail, have a little sympathy for that owner. They are working through a lot of issues and they could use your support.