At some point a business owner may face the need to temporarily close their business, for reasons ranging from an illness or natural disaster to a military deployment or cash-flow crisis. A business suspension may be a better choice, and more palatable, than a full closure, but owners should consider all financial implications before making a decision.
It is difficult in any circumstance to restart a business that has been suspended, so think carefully about this option. The reason why you are suspending operations is the most important element in the decision. For instance, business owners who are moving to a bigger space or to a new location will follow a different course of action than those who are closing due to a medical problem or a military deployment.
If you are suspending operations because of financial difficulties directly related to the business itself, consider closing for good and reopening when you’ve got a better market opportunity or the economy improves. Once a business suspends operations, it’s very difficult to bring it back to its former levels.
Communicate a temporary business closure to customers and employees
The first step when considering a temporary business closure is to determine the long-term implications to both customers and employees. If you have loyal customers, is there a similar company still operating to which you can refer them? While some of your customers may migrate for good, at least you’ll be propagating goodwill among customers and competitors. You may be able to work out a deal with a trusted competitor that suits you both, such as a finder’s fee or commission on your customers. That money can then be put aside to boost marketing efforts when you’re ready to reopen.
Let customers know why you are closing to squelch any rumors. For example, one cake shop owner with a high-risk pregnancy clearly noted that she would be back after the baby was born and hoped her customers would celebrate with her in the fall. She instructed them to check the website around the beginning of September to see a definitive reopening date.
Also consider how you will manage your employees. You can furlough them or lay them off, depending on the length of your closure. You will be liable for accumulated vacation pay and other employee benefits during the furlough and may need to pay severance if you plan to lay them off.
Create a plan for your financial paperwork
Once you’ve determined that you will temporarily close, speak with your accountant about how to manage interim taxes and paperwork. Each state has different requirements for filing, so the help of an expert will be valuable during this time.
Also consider the following when temporarily closing:
- How will you collect and pay bills while you are on leave? Is it possible to delegate this task so you can still meet your obligations?
- If you have a physical location, what will you do with it while on leave? Can you move out and let someone else take over the space? What will it cost to terminate the lease? Is it possible to sell the property (if you own it) and reopen elsewhere?
- Is your inventory liable to go stale while you are on leave? Is it perishable? If it could become shopworn, consider selling it in a liquidation sale. Compare the pros and cons of paying for storage or liquidating.
There are government loan programs available for disaster recovery and military absences, so check with the appropriate agency. You may be eligible for additional support when you are ready to reopen.