What are the main reasons businesses close?

According to MarketWatch, 15,742 businesses listed on Yelp closed during the month prior due to the pandemic.

We know these are unusual times, and that many businesses are struggling. But there are plenty of additional reasons why you may want to consider closing up shop. Whether you are buying, selling, closing, or prospecting, most business ventures are risky and this is especially the case in 2020.

Financial Instability

Many businesses are in crisis right now and COVID financing options will not be available forever.

If you are too far into debt, it might be time to cut the ties. But first, it’s a good idea to make sure you’ve uncovered all of your potential options for financing.

Without the proper evaluation, identifying the growth limitations, or the excessive loss of capital, a business owner might feel obligated to give up the business venture.


Retirement is as good a reason as any to consider closing the doors or selling.

What are the main reasons businesses close?


For many brick and mortar businesses, location is key, and relocation is one of the common reasons businesses close.

But you may not need to close shop entirely if you are able to make your business virtual.

Mental or Physical Health Issues

What are the main reasons businesses close?

A lack of systems and processes creates extra work for the owners, eventually leading to burnout. Many businesses cannot survive with a distracted and uninterested owner.

Stress, grief, and other emotional factors can take a toll on your entire life, including the business. Of course, if there are also physical health factors involved you will want to take some time off to focus on our well being.

This is why setting up a business to run without you is crucial if you want it to last in the long term. When you know that others can take over easily, you can be easier on yourself and take time when you need it.

External Economic Factors

As we’ve seen with COVID-19, there’s always a chance that something entirely unexpected and out of our control can land on our doorstep and change everything.

There is no way to entirely prepare for these situations, but it is possible to build, plan, and structure a business in such a way that you minimize risk, which means you can be more resilient for such unexpected events.

Shiny Object Syndrome

One of the reasons that businesses close is that owners literally get distracted and want to invest in the next best thing.

Entrepreneurs are often risk-seeking people who are always on the lookout for the next best investment or trend. They may get distracted by new opportunities and greater ventures.

If you are always thinking that the grass might be greener on the other side, be careful of making rash decisions that could leave your previous business to wither.

On the other hand, it’s also sometimes possible to pivot, merge, or acquire additional investments that could revive the existing business.

Lack of Business Plan or Poor Planning

What are the main reasons businesses close?

Every business is a risk, and poor planning from the foundation can cause major problems down the line.

Risks come in many forms, including:

  • Financial
  • Operational
  • Strategic
  • Compliance
  • Reputation

Having a well-developed business plan, reviewing it regularly, and getting a risk analysis are all ways of helping a business stay more resilient over time.

If these are in place and you do decide to close, you are much more likely to make a rational and careful decision.


Everyone’s priorities change over time, and this is true if no matter what kind of relationship you have, even business partnerships.

One of the reasons businesses close is conflict amongst the shareholders or partners. Sometimes a conflicting vision develops over time, and clashes can cause toxicity which ultimately leads to a business’s downfall.

Don’t let your business deteriorate due to interpersonal conflict.


If your business details are not considered in your will, get this updated as soon as possible. It doesn’t matter how old you are; you don’t want to risk your business moving into the wrong hands.

Without proper systems and processes, there is little, if any, ability to pass on the success of a business to someone else.

We Can Help Protect Your Business

Our qualified attorneys can help you make the best decisions and ensure your business is legally protected.

Call 303-780-7333 or schedule an appointment for a free consultation.

Enjoyed this article? Here are three more you might like:

Why Sell Your Business?
How to Manage a Crisis Before it Happens
9 Reasons to Buy a Business Instead of Starting from Scratch