Closing Time: The art of shutting down your business

David Hile spent decades building his business, Hile Creative. Over the years he grew to know what would make the firm grow; the right opportunity or a promising new employee. And then, when it came time, he devoted just as much thought and attention to properly closing up shop.

"I told myself if the job ever stops being rewarding or creative I would go back to my roots as a fine artist," Hile says. "The last couple of years were hard because the industry was changing so fast. Also my job had turned into mostly sales."

Hile Creative became a household name in the Ann Arbor's creative scene. It did branding and marketing work for big clients like Beaumont Hospital and the University of Michigan, as well as little ones like Venturi, a Traverse City-based maker of bathroom products. There were 11 people on the company payroll when Hile started thinking about winding down.

Hile expected to run his business until his 70s. He made it to 63. That was in the first few weeks of 2015. By that spring he broke the news to his staff. The end came in May of last year.

"My staff was my biggest consideration at the time," Hile says. "I knew they would do well because they are all extremely talented."

Failure is not a four-letter word

It seems like everyone dreams of one day opening a business. All of their friends and acquaintances have an idea or two of how best to grow it. Consultants are full of advice on how to scale it. No one ever talks to them about the day they will have to shut it down.

And that day is far more likely to come sooner than an owner expects. Statistics from the U.S. Small Business Administration state about half of businesses with employees fail within their first five years. Only a third will make it to their 10th anniversary, while only 26 percent make it to 15 years.

"Ignorance and blind optimism are an entrepreneur's best friends," says Bill Mayer, vice president of entrepreneurial services for Ann Arbor SPARK. "If you could think of everything that could go wrong in a new company no one would ever start a new business."

That quote and those statistics are daunting. So much so that the fear of them drives entrepreneurs to do some kooky things. Even the people who live their lives by facts and statistics start to engage in superstitious behavior when the subject of a failing firm comes up in conversation.

For instance, most entrepreneurs will talk anyone and everyone's ear off about what it takes to build a business. Reach out to them to talk about what happens when a business goes under, and the silence is deafening. A handful of the entrepreneurs contacted for this story who had startups fail on their watch declined to talk about the experience.

Some of these companies were darlings of Ann Arbor's new economy at one point of another. They scored millions of dollars in venture capital. They took home big prizes at the Accelerate Michigan Innovation Competition, the state's premiere business plan competition. And then they failed for one reason or another.

"There are a million different reasons a company can go out of business that are unrelated to its performance," Mayer says.

Some of those entrepreneurs got right back on the horse and started new companies. A couple landed mid-level managerial jobs at marquee local tech firms hungry to add talent. Ann Arbor SPARK works to pair those entrepreneurs and their former employees with nearby growing companies through its online talent portal and networking events to keep talent local.

"That's really the mark of a mature ecosystem," Mayer says. "Are there enough companies to absorb displaced people? That means there is less risk for people who want to move here for a job."

Making those sorts of smooth transitions happen is often easier said than done. Most entrepreneurs are experts when it comes to explaining their vision. They want to be seen as synonymous with success, not failure. Being honest with people when things are going the wrong way isn't easy, but it's the right move for people who want to build a reputation in a place they want to sink roots.

"The best thing to do is be honest with everyone," Mayer says. "You can't make a bad situation good. You can just be honest with everyone and make the best of it."

Soft landings

Hile lived the good life building Hile Creative for 30 years. He started the company as an illustrator with a dream working part-time for a Ann Arbor-based agency that is no longer in business.

"My passion at that time was illustration," Hile says. "This was before the computer made its impact in the industry so there was a lot of illustration work out there."

The end of Hile Creative came in its 31st year when Hile became tired of it all. He decided to retire to his fine art studio as a one-man operation. He knew he couldn't take his nearly dozen staffers with him so he spent his last months in business helping them find jobs.

Many found new jobs shortly after Hile announced the closing of his business. Hile says he also introduced some of his employees to key people on Hile Creative's active client list, paving the way for them to continue that work.

"They were all able to find a new job very easily," Hile says.

One employee stuck around. It was an office manager who worked a couple days a week but had done so at Hile Creative for many years. Hile says he kept that person on the firm's health insurance and payroll for a few extra weeks after shutting down Hile Creative until they landed on their feet with a new job, too. Then it was over. The office furniture was packed up and Hile Creative ceased to be. It was both a sad and exciting day for Hile when he reached out for the office light switch one last time.

"The day I shut off the lights I was a little nostalgic," Hile says. "Since then I haven't looked back."

Jon Zemke is the News Editor of Concentrate and its sister publications, Model D and Metromode.
 
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