Sometimes, owning a small business can force you and your family into a difficult conversation.
Let’s say, for example, that your wife owns a small business that’s been struggling for a few years now. She loves her job and she’s motivated to work her way out of these financial struggles, but the business’ decline has taken its toll on the family’s finances. You and your wife have two kids at home and, making matters worse, you’re helping to keep the business afloat with your $70,000 a year salary.
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At some point, you began to realize you were sinking too much of your own money and savings into the struggling business. And although your wife is aware of the financial struggles, this situation can be tough for someone who’s passionate about their small business but needs to see the writing on the wall.
As of 2023, there were roughly 33 million small businesses in the U.S., according to the Small Business Administration (SBA). The Bureau of Labor Statistics reported last year that only about 35% of small businesses that were established in 2013 were still operating 10 years later.
Plenty of small business owners have had to make difficult decisions in the last decade, and your wife appears to be on the same track. Starting a small business can be tough, but knowing when to pull the plug when things aren’t going well can be even tougher.
You and your wife appear to be destined for a difficult conversation, but it’s important to assess the situation carefully before you two decide what to do next.
What needs to be considered
A small business that’s struggling isn’t automatically beyond hope, and it’s important to take a close look at the business’ finances — and your family’s finances — to see if the situation is salvageable.
One of the most important things to do is put together a profit and loss statement for the business to get a sense of how much money it’s losing. At the same time, add up the costs of running the business to get a clear idea of how much revenue it will take to break even and/or make a profit each month.
It’s also important to create a household budget, and to add the business as an expense in that budget if it’s costing you money instead of making you money. But also, try to figure out what the business is costing you beyond the dollar amount.
For example, let’s say you’re pumping $1,000 per month into your wife’s business and are only getting $400 in return. With a $600 loss each month, that’s $600 that you’re not putting into your 401(k) or your other retirement savings accounts. And if you’re putting that $1,000 deposit into your wife’s business on a credit card, that’s $600 in credit card debt every month that you’ll have to pay off with your own money.
It’s important to understand what you and your wife are giving up in order to keep the business going.
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How to know when it’s time to call it quits
The SBA reports that between 1994 and 2020, about 68% of small businesses made it to the two-year mark. This means that roughly one-third folded within that timeframe. Furthermore, only about 49% of small businesses made it to the five-year mark.
Meanwhile, today’s economic environment introduces a list of new challenges for small businesses, as the combination of lingering inflation and high interest rates may be making it harder for a lot of small operations to thrive.
Data from Goldman Sachs reveals that only 69% of small businesses are optimistic about their financial path in 2025. Meanwhile, 53% of small businesses can’t afford to take out a loan to keep their operations afloat due to current interest rates.
If you have a small business that’s been sluggish, you may want to consider letting it fold given the current economic uncertainty. A good 72% of Americans now say a near-term recession is likely, according to a late April Ipsos poll, and a broad economic downturn might hurt your business even more.
Of course, it’s not easy to say goodbye to a venture you’re passionate about, but there may be a few signs that could help you realize when it’s time to let it go.
The writing on the wall
First, if your family is landing in debt month after month because you’re funding a business that’s losing money, that’s reason enough to move on. It’s one thing to not turn a profit, but it’s another thing to see your personal financial situation continuously worsen.
Secondly, if your struggling business is stopping your family from meeting its financial goals, that’s another reason to call it quits. If you’re spending so much money on the business that you’re not saving for things like retirement, your kids’ college or a down payment on a house, it may be time to close up shop.
Also, if the business is a source of marital strife, it’s time to give shutting the business down some serious thought. The stress of a failing business could easily cause conflict in a marriage and you don’t want to let things reach a point where your relationship begins to fall apart.
Finally, if you don’t see a clear path toward profitability, then it’s time to put your business to rest. This especially holds true if the business has already been struggling for four years and you’ve had time to try to work out the growing pains.
Remember, though, that closing a small business doesn’t make you a failure. It takes courage to start a business and sometimes even terrific ideas don’t work out for reasons outside of your control.
Rather than focus on the negative side of closing your business, focus on the positive. You now have an opportunity to potentially pivot into a new career and use the skills and experience you developed as a business owner to be successful in a different role. Plus, after years of struggle, there’s something to be said for the guarantee of a steady paycheck.
Also, keep in mind that if your financial situation changes, you may end up in a position where you can start another business in the future.
Once your household income rises or you meet certain savings goals, you may be able to take a chance on a new venture. But if the thing your household requires most right now is money, then you may have to give up on the business you love for the time being to address that pressing need.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
