Throwing in the Towel Prepare When Its Time to Close Up Shop By Rollene Saal Business misfortune, waning enthusi- asm, illness, retirement: There are a host of reasons why company owners can be faced with the decision to let their enter- prises go. Sometimes owners duck the issue and try to hang on as long as possi- ble, making the inevitable more difficult. In other cases, they welcome the relief that comes from shedding a burdensome and unwanted business, and then turn to new possibilities for the future. Even when the motivation for change and the eventual outcome are positive, the process can be a painful one. “No matter how you look at it, once you’re out of business, you’re out of things,” says Phillip Sidwell, a family-business consultant in Atlanta. “You have to face your peers in the community, but you’re not part of the club anymore. It’s tough, and self-esteem can take a tremendous hit.” To James Connolly, business success came in a rush. He and a partner started Book of the Road in the early 1980s to publish and distribute audiotaped books through truck stops. At the time, audio- tape rights could be bought cheaply— $250 a book—and mass-market publish- ers were ignoring the audio-book busi- ness. The company grew rapidly, from six California locations to outlets at more than 800 truck stops coast to coast. “We were doing great,’ recalls Connolly. “Sales were terrific, and we felt like pioneers opening a new market.” Book of the Road had a hold on its niche, but not for long. Major publishers caught on to the potential of audio books, and the cost of rights went up to $10,000 or more for a hot title. Big com- panies like Bantam and Simon & Schuster began to flood the shelves of truck stops with their own audio books. For Book of the Road, the exhilaration of success was replaced by the wrench- ing reality of failure. “We just couldn’t keep up,” says Connolly. “By the end of 1988, we made the decision to wrap up the business and move on.” Sounds straightforward, doesn’t it? The reasonable thing to do when the odds are against you is cut your losses, salvage whatever capital remains and try something different. Yet letting go of a business is a difficult, emotion- laden experience. Connolly confesses to feelings of sadness and anger at see- ing his promising venture collapse. He lost money, including salary foregone to help keep the business afloat. Now the associate publisher of a small pub- lishing company in California, he looks back on the Book of the Road experience as a valuable lesson, not a personal failure. “I got to see the shape of the whole elephant,’ says Connolly. “T learned everything about how a busi- ness works.” Enough Is Enough Small-business consultants stress the importance of entrepreneurs not identi- fying too closely with their companies. William Roiter, director of employee assistance and services for American PsychManagement, a Boston managed- care company, often sees clients who can’t separate themselves from their firms. “If their businesses are in decline, they feel that way about themselves. Their decision making often has an air of desperation about it. They start rein- vesting in their companies when it’s no longer prudent: taking out equity loans on their homes, borrowing from friends and family. They don’t know when enough is enough. When the business finally ends, there’s a real sense of fail- ure.” (See Warning Signs in “Is It Time to Go?” page 14.) A businesswoman in the Northeast didn’t know when it was time to call it quits. She wanted to expand her sag- ging shoe-store business and sought a bank loan, which could only be obtained with the co-signature of her 87-year-old uncle. The uncle agreed to co-sign, and she borrowed $100,000, promptly moving to enlarged quarters in a small mall. Business didn’t improve, so she looked for ways— expensive ways—to improve the oper- ation: She bought new fixtures, leased a large computer and added lines of clothing. Sales still languished. When people suggested she close up the store and work for someone else, she was appalled. She had always had her own business. So she borrowed an addi- tional $80,000, again using her uncle’s name. This sad tale ended after the busi- nesswoman fell behind on the pay- ments, and the bank called in the loan. She didn’t have the money, so her aged uncle was forced to repay the $180,000. “Tt’s a familiar story,’ says Howard Neiman, a certified public accountant in Atlanta, who works with family busi- nesses. “That’s what happens when people aren’t willing to cut their losses. They throw good money after bad, always thinking they can recoup.” As the preceding example illustrates, family members can complicate the process of letting go. Everyone would have been better off if the uncle had been as cold-eyed and objective as the bank and refused to co-sign the loan. If the shoe-store owner had folded the business early on and gone to work for another retailer (which she was eventu- ally forced to