Even though entrepreneurship is a charming field to step foot in, it can be ruthless. 50% of all startups fail after the four-year period. But by then, they have lost too much of their time and money.
Parting ways can be hard, but a timely exit is probably best for you. Putting your blood and sweat into a venture makes entrepreneurship a very personal and emotional battle, one that you would want to fight till the end. But these emotions often cost founders a lot and affect all aspects of their life.
Because founders are so invested in their companies, detecting signs of a sinking ship is hard. This is why most of them only close down shop when forced by a lack of capital to fund operations. The more intelligent way to handle things is to carefully wrap your company up when you notice the following red flags. That way, you can bypass bankruptcy and look into new prospects with the remainder of your savings.
- Your capital is touching the bottom
No business is run without money. It is the foundation on which all companies rest. It is also the most volatile factor for your company’s health. Just to put things into perspective, 29% of startups fail because they run out of capital to fund operations.
Starting a business requires a steady outflow of cash but whether or not your service gives quick returns, it should still show promise of eventual profitability. Failing to meet breakeven deadlines could be an indicator of poor business practices but if you continually miss revised deadlines, your service probably isn’t profitable.
It may be possible that you are getting a lot of business but still not making profit. This could be attributed to poor pricing, disloyal customers, and overhead and hidden costs. Low profitability is a clear indicator of bad investment. What’s distressing is that business teams work really hard so it is natural for them to only expect returns.
The ideal way to come out of a dying business is with some capital still left at your disposal. You could invest it in other avenues and might find yourself making a lot more profit than before. Most entrepreneurs become bankrupt at least once before becoming successful so it may be time to move on to better things before you hit rock bottom.
- How you see your product is not how your customer sees it
Dan Ariely talks about how putting in “effort adds to our affection and attachment”. In an experiment of his, subjects were asked to make origami structures by following the instructions provided to them. The results came out far from the expected outcome but the builders were still willing to pay 5 times the price for their origami structures than a buyer would.
It is possible that what we find so appealing about our own product might only be an illusion. Our efforts, time, and money make us believe that our offering has to have substantial worth, even for our market.
There are several reasons for product failure. Offering insufficient value, or significantly lesser than a competitor, will put you out of the race. Poorly conducted market research might have depicted a false need for your product. Other times, the needs of your demographic have evolved rendering your service obsolete. So are you bringing any true value?
If consistent effort has not improved customer engagement, failure is inevitable. No product can last if no one is buying it. The problem is that creators become very emotionally attached to their creations and continue to push their products into the market. This makes it hard for them to realize when it is time to stop.
- Business performance is below par and growth is stagnant
Certain business ventures take awhile to set off and receive monetary validation while others provide quick returns. In the cases of both, you should be able to see at least a gradual surge in demand and a means to sustain business activity.
Inefficient internal practices pull down productivity. Poor management, talent deficiency or lack of employee engagement manifest themselves in poor business performance and growth. Sometimes when detected, these can be taken care of.
When you are unable to tackle these problems, the chances of a promising future for your venture will be low. Even with everyone putting in optimal work hours, you will be struggling to make ends meet.
Only businesses that continually retain and increase demand for their products are able to survive in the industry. Competitors and changing market trends keep forcing companies to constantly innovate and offer better value. Prolonged periods with no growth only mean that the competition will eventually eat you up or leave you fighting for lower scraps. Neither will be worth it.
- Your passion and drive are just not there anymore
When entrepreneurs decide to step foot into the industry, they bring with them a drive to create. Their passion makes other people believe in their mission and then later, in their product.
This very passion is critical for the success of any product. If you wholeheartedly believe in your product, influencing customers and making sales comes naturally to you. You can instil the same drive within your workforce to motivate them and engineer desired results.
But the exact opposite happens when your mission starts to lose its lustre. It begins to have an impact on all levels of your organization and business performance takes a hit. You notice that despite working to your full capacity, your numbers are dropping and your product is losing customers.
At this point, none of it might seem worthwhile but there are ways to rekindle passion for your company. If you still think your business has lost meaning for you, then the future of it all will be dim. In such a scenario, trying to hold a failing company together will likely not benefit you and the experience will not be fulfilling. It will adversely affect both your company and the quality of your life.
- The battle is taking a toll on your mind
While the thought of generating a high revenue from working for yourself sounds like the ultimate dream, entrepreneurship has its price- and it’s not small. A study stated that 49% of all founders suffer from mental health problems, with 30% admitting to being depressed. This is a lot higher than the prevalence of depression in the general US population(7%).
That is not all. Struggling entrepreneurs often see their families struggle with them. Work stress strains personal relationships and long absences create feelings of detachment and isolation. Business anxiety takes a toll on everyone.
When there is so much at stake, a battle that isn’t resulting in any victories can break the resolve of a founder. They find themselves feeling trapped and hopeless. Because of the stigma surrounding depression, entrepreneurs fight their battles alone. Talking about work feels like a weakness- not suitable for the captain of the ship. This too, adds weight to their struggles and finding a way out feels impossible.
Too many entrepreneurs take their life every year. With such a low success rate for startups, it is likely that your company might not be a success. So if you see the signs of potential dissolution, take the hint and do what is best for your well-being. It is highly likely that you can start over again and achieve success.
If you feel the stress has been there for too long and only keeps on mounting, it may be time to end this toxic relationship with your company.
We know it isn’t easy
Pulling the plug can be heartbreaking but seasoned entrepreneurs know it is often the wisest of calls. Shielding yourself from further despair will help you retain revenue and potential for other more profitable ventures. Your prior failures will give you the wisdom to establish more streamlined business processes in the future.
Sometimes founders are too close to the problem that they cannot see it. They like to think that if their team just works hard, if marketing efforts are doubled and the product offering keeps improving, their company will triumph. Overly optimistic approaches like these drain founders of their very last cent. Step back, reassess your performance, and ask where you stand.
If you still think your service has potential, you can halt operations for awhile and focus on other sources of revenue. If you want to give it one last try, you can define a set of short-term goals for your service and promise to close shop if you are unable to achieve them. This will also show you whether your product is worth your time.
In all cases, having the strength to let go is extremely important.
Kiran Ajaz is a technical writer and publisher at EZOfficeInventory, which offers an asset tracking software for SMBs, mid-sized businesses, enterprises and more. She is a guest writer and an MBA graduate. Kiran is enthusiastic about the way technology interacts with contemporary businesses and enables them to focus on core efficiencies.