The aftermath of a business closure

in Managing by The Business Room
(1 Rating)
Business closure

When starting a small business, no budding entrepreneur wants to dwell too long on the possibility of their venture ever failing. After all, the majority of small business owners view business ownership as an opportunity to build wealth greater than they might have done through regular employment, so their outlook is generally positive by necessity.1

A recent survey by Galaxy Research, conducted on behalf of American Express, however, showed that over half of consumer-facing small businesses (54 per cent) are currently finding it hard to compete.2 It pays, therefore, for owners to be mindful of the effects a business’s closure can have on themselves and the community.

Galaxy found that the majority of customers (85 per cent) admitted they would miss a small business in their local area if it were forced to close.3 Indeed, the effects are more likely to affect consumers in regional and rural communities, causing them to feel disappointed (47 per cent), annoyed (20 per cent) and regretful (20 per cent) when compared to their city counterparts.3

Why businesses close down

According to the latest figures from ASIC, more than 7,000 Australian small businesses filed for insolvency in the year 2012-13. The data shows the top three nominated causes of failure to be poor strategic management (42 per cent), inadequate cash flow or high cash use (41 per cent), and trading losses (32 per cent).4

The take-away from this data is that small business owners need a clear vision of their objectives (beyond making money) and of the resources required to achieve them. Owners also need to be realistic with the amount of money their businesses need to operate versus the amount they have.

When a business closes down

Business owners face financial ruin when their hopes and dreams seemingly collapse around them. But there’s far more at stake than the financial wellbeing of the individual(s) operating the business.

In an analysis of the Household, Income and Labour Dynamics (HILDA) data set, researchers acknowledged that the closing of a business “can negatively influence the owner’s reputation, career aspirations, family relationships [and] individual wellbeing”1 in addition to their financial situation.

In the same analysis, researchers noted that, "The emotional attachment between the business owner and their business [is such that] a parallel has been drawn between the grief experienced from business failure and that which is experienced when a person is forced to give up some aspect of their life they deem important, or even through the loss of a loved one.”1

Bouncing back

In spite of the negative impact a business failure can have on the business owner, successful entrepreneurs agree that it’s important to be resilient, and that failure should be viewed as a learning experience and not the end.

In The Secret to Success, Richard Branson advises, “If you are an entrepreneur and your first venture wasn't a success, welcome to the club! Every successful businessperson has experienced a few failures along the way.” 5

Rather than wallowing in the fallout of a failed venture, business owners need to take a step back from it all, note where they went wrong, dust themselves off and try again.

To learn more about the Shop Small movement, visit Shop Small Australia.


1 Life in Small Business in Australia: Evidence from the HILDA Survey, Justin B. Craig, Michael Schaper, and Clay Dibrell, 2007,,%20Justin_final%20paper.pdf

2 Galaxy Research, October 2013 – Conducted online among a representative sample of 301 Australian businesses that mainly deal direct with consumers.

3 Galaxy Research, October 2013 – Conducted online among a representative sample of 1,003 residents, 18-64 year old, throughout Australia including both capital city and non- capital city areas.

4 ASIC Insolvency statistics: External administrators’ reports (July 2012 to June 2013), ASIC, 2013,$file/rep372-published-17-October-2013.pdf

5 Richard Branson on the Secret to Success: Failure, Richard Branson, 2013,

This article represents the views of the author only and not those of American Express.

Related Keywords : Managing
Your Rating :

The Business Room

The place where Australian small business owners go to equip themselves with knowledge and skills to help their business grow.

Poll Results

How many hours do you work on your business each week?

  • 20-30
  • 30-40
  • 40-50
  • 50-60

Poll Results

How many hours do you work on your business each week?

20-30: 18%
30-40: 18%
40-50: 23%
50-60: 41%