The following appeared in a study, Financial Difficulties of Small Businesses
and Reasons for Their Failure, prepared for the Small Business Administration
(SBA). They are statements made by individuals whose business was in financial
difficulty and subsequently failed. Their comments are listed under the stated
reason for failure.
- IRS stepped in and took over the bank account.
- The IRS threatened to repossess [our] tools of trade if [we] did not pay
the $20,000 back taxes immediately.
- When the IRS agent told us that they will put padlocks on our doors if
we can’t come up with the money in one month.
- Pressure from IRS. The IRS is “merciless.”
- IRS was attempting to reach the non-debtors wife’s income (i.e., levy)
for the tax liabilities, which all preceded her marriage to the debtor.
- The IRS changed the locks on the business, and the business had to declare
bankruptcy in order for the owners to be able to even get into the building.
- Bank was not going to refinance her business because of divorce settlement.
- Inability to control blood glucose level, cholesterol, etc. due to stress
of dealing with creditors.
- His wife has a nervous breakdown. He just knew they couldn’t handle their
- The injury to his arm.
- She could not pay her medical bills. She had filed bankruptcy as soon as
she couldn’t pay her bills, rather than get behind in payments.
- Creditors were hounding him to pay his wife’s credit card. He had not canceled
the cards after the divorce. He returned his but never closed the accounts.
- “I had lost court case in trying to settle child support but lost. Was
given 48 hours to settle $36,000 of debt which was impossible.”
And, finally, some comments regarding those who suffered a calamity that
pushed them into failure, and subsequent bankruptcy.
- The engine blew in the truck and they couldn’t afford to buy another one.
- His van was stolen and he could no longer transport the equipment necessary
to carry on his business.
- The organization they were linked with sold out and was taken over by another
organization that was hard to work with.
- The gas explosion.
- Death of foreman.
- The State came in and tore up the road.
Despite the above comments, The Study also suggests that entrepreneurs are
often not the callow amateurs they are portrayed as being, but business veterans
who have the gumption to take the risks inherent in starting a new enterprise.
They are people who are often prepared to shrug off the effects of a business
failure and try again; a process made possible by the “fresh start” philosophy
of U.S. bankruptcy laws. Failure does not always have to be viewed negatively.
It can offer an opportunity for the entrepreneur to learn and gain from the
experience in order to do a better job next time.