You’ve probably done this. The account gets low, payroll is coming, and you move a little money over from savings. Just this once.
A few months later, you do it again. Also just this once.
Nobody plans to keep a business alive with their personal savings. It happens a few thousand dollars at a time, and every transfer feels like the responsible thing to do.
Sometimes it is. Sometimes a business hits a rough patch, and the right move is to hang on until it passes. And sometimes the business stopped working a while ago, and every transfer just makes the hole deeper.
So when is it time to close the doors? Here’s the short version: a bad season says hang on, and a broken model says stop. The hard part is telling which one you’re in. That’s what the rest of this post is for.
A boutique that used to work
This week, Bob runs a retail boutique. Clothes, gifts, a little bit of everything.
Three years ago, the store did about $400,000 in sales. This year, it’s on track for about $280,000. The rent didn’t go down, and the lease still has two years on it. A lot of the store’s old regulars buy the same things online now.
To cover the gap, about $40,000 of Bob’s own savings has gone into the business over the last two years. Each time, it was supposed to be a one-time thing.
Bob’s numbers
Amount
Sales three years ago
$400,000
Sales this year (on track)
$280,000
Drop in sales
$120,000 (30%)
Owner’s savings put in, last two years
$40,000
Bob isn’t doing anything wrong. Shop owners everywhere are dealing with the same shift. But his numbers raise a real question. Is this a rough stretch the store can ride out, or has it stopped working the way it used to?
Those two need very different decisions. Three tests will tell you which one you’re looking at.
Look at the trend, not the month
Most owners judge their business by how last month felt. A slow month scares you. A good one makes you forget the slow one. Neither tells you much.
Pull your sales for the same stretch, three years running. Use the same months each year so a normal slow season doesn’t fool you. If your business is seasonal, compare October to October, not October to July.
One bad year is a season. Three years headed the same direction is a pattern.
Bob’s store went from $400,000 to $280,000. That’s $120,000 in sales that didn’t show up, a 30% drop. That’s not a bad month, and it’s not a bad year either.
The trend alone doesn’t settle it, though. A business can shrink for a reason that’s temporary. That’s the second test.
Ask why it’s happening
Every drop has a reason. What matters is whether the reason goes away.
A bad season has a reason that goes away. The road out front is under construction. The local economy dips. A big customer moves out of town. It hurts, but it has an end, even if you don’t know the date yet.
A broken model has a reason that stays. Your business model is just how you make money: who buys from you, what they buy, and why they pick you over somebody else. When one of those changes for good, the old way stops working no matter how hard you push.
Bob’s regulars buying online is a reason that stays. That doesn’t mean the store is finished. It means the old version of it is.
Be honest with yourself here. Owners tend to decide the reason is temporary, because that’s the answer that lets them keep going. So ask it this way: if nothing I control changes, does this fix itself in the next year? If the answer is no, you’re not waiting out a season.
Follow your own money
The third test is the simplest one, and the hardest to look at. Where is the money coming from that keeps the doors open?
A healthy business pays its own bills. Rent, payroll, and inventory come out of what customers pay. If the business only stays open because you keep putting money in, it’s not paying for itself. You are.
It never feels that way from the inside. Every transfer has a good reason: a slow month, a big inventory order, rent due before the holiday rush. Bob’s $40,000 didn’t go in all at once. It went in over two years, about $20,000 a year, one “just this once” at a time. That’s how it almost always happens.
Watch for bills you can’t walk away from, too. Bob’s lease has two years left, and that rent shows up every month whether customers do or not. A fixed bill like that is exactly what keeps pulling savings into a business that isn’t covering it.
Pick your number before you need it
Put the three tests together. If sales have trended down for years, the reason isn’t going away, and you’re the one covering the gap, you have your answer, even if you don’t like it.
The trouble is that most owners never reach a point where they stop. Every check feels like the last one. So if you were my client, here’s what I’d tell you to do.
Pick a number. The most you’re willing to put in from your own pocket.
Decide it now, while you’re thinking clearly. Not when the account’s empty and you’re scared.
If the trend is down, the reason isn’t going away, and you’ve hit your number, it’s time to talk about what’s next.
That conversation doesn’t always end in closing. It might mean a smaller version of the business: less space when the lease is up, fewer products, a different way to reach the customers you still have. But it doesn’t mean another check.
Write the number down. If you share your money with a spouse or partner, decide it together. That’s your savings and your family’s, and it doesn’t come back.
Not deciding is the expensive part
Closing a business is hard. It feels like quitting, and most owners would rather do almost anything than say it out loud.
But closing usually isn’t where owners get hurt the worst. It’s the years of not deciding, when savings drain a little at a time and the call ends up being made by an empty account instead of by you. The owners I’ve seen come through this in good shape made the decision while they still had choices.
A bad season and a broken model can look the same from the inside. The difference is what they ask of you.
One says hang on. The other says stop writing checks.
So here’s your one thing for this week: write down your number. The most you’d put into your business from your own pocket. You may never need it. But if you do, you’ll be glad you picked it while you were calm.
Want the conversation version? Listen to Episode 15. And if you want to build the cash cushion that buys you time to answer this question, Episode 10 on preparing for a slow season is the place to start Episode 10.