One of the replies I received on the back of the quote from Michael Jordan last week, had this question below:
“How do start up business owners know whether or not they are just flogging a dead horse? Maybe their business just won’t work and they need to walk away. It can be soul destroying when your business is just not working. It feels personal because it’s your baby. Walking away guarantees failure, but how long do you keep going for?”
I could probably write a book about this one topic. In my experience, this is not a straightforward answer but here’s my ‘tuppence worth’:
Let’s take each part of this question:
“How do start up business owners know whether or not they are just flogging a dead horse? Maybe their business just won’t work and they need to walk away.”
1. Know What A Dead Horse Looks Like
Because you set up the business, you’re emotional about the business. Which is dangerous when it comes to assessing it’s health. One of the most useful things a start-up business owner can do if the business isn’t working is to get someone neutral to look at their business and get feedback. This ideally should be experienced business owners. They don’t have to be in the same industry to give valuable insights.
But most business people I know (especially men!) are too proud to do this, which is a pity because a lot of valuable info is probably very close to you and experienced ‘unemotional’ analysis is what’s needed. Making a business work is all about figuring out ‘what you can’t see’ – & the best way to solve that problem is to ask respected others for their input.
I remember a now very successful business colleague hit a point of crisis in year 3 of his business. He took the ballsy move of asking 4 experienced business owners to meet with him (all together), with a view to seeing if the business was salvageable and if so, to help create a survival plan. The answer was yes. Their insights helped him to create a survival plan and 2 years on his business is thriving.
2. You need to see a way out
I remember sitting with a business owner who was trying to work out if his business was worth the pain of turning it around. Overheads had been cut to the bone. The time had come to say yes or no re going forward. The advice from the accountant was to close the business (in my experience, accountants say this way too easily).
We started to look at the opportunities in the market based on what his business was doing. It was clear that there was a market for his services and with the right financial approach he would make profit, having learnt from his mistakes. The decision was to keep going. And it worked.
But it only worked because there was a very clear plan which showed exactly what the rewards would be financially. If you can’t see that, then it’s a very serious problem and it could mean closing the business.
As the saying goes, ‘Cut your losses’. It takes more courage and insight to know when to close a business than it does to keep it going.
“It can be soul destroying when your business is just not working.
3. Remember Einstein’s Words Of Wisdom
The wise man with that wonderful head of hair said: “The definition of insanity is to keep doing the same thing and expect different results.”
Most start-ups don’t work.
What I mean by that is that most businesses in the first 3 years of their existence don’t work the way the owner thought it would (unless it’s a franchise, but that’s also changed with the current market).
The first 3 years of a business are critical as they are all about continuous adapting i.e. you have to keep changing things to find what does work. Unfortunately, in my experience this is one of the main reasons a shockingly high number of businesses fail in their first 2 years. (50% of all start-ups close within 2 years of starting)
Having a great product or service isn’t enough by a long shot. You, as the owner, have to develop your skills in an array of areas but most especially in sales and marketing (Throw in management of staff, financials, time and your stress levels and you can see how things get busy very quickly!)
“It feels personal because it’s your baby.”
Of course it feels personal. You’ve put your money, time and emotion into creating something special. And it’s not working. That hurts but it dangerously clouds your judgement and ability to make changes and decisions. Your mindset is critical at all times in business but never more when it comes to making ‘stay or stop’ decisions.
If you can’t get that clear mindset, this is why it’s important to ask other experienced heads for their view and help.
“Walking away guarantees failure, but how long do you keep going for?”
There’s a lot to this short line.
Firstly, how we see a business ‘failure’ in Ireland or just failure in general.
If a business has to close (which they do all the time) owners understandably take it very personally. But you should know that some of the smartest business people I know have had that experience. The key thing is not to let it knock your confidence. One way to do that is to see the end of the business as an event and not you. It’s something that didn’t work. It doesn’t mean you can’t succeed at another business in the future.
But the real gems from a business not working come from the lessons learned IF you’re open to finding them. These are the lessons that can make you serious money in the future. They may not be easy to take but if you’re ballsy enough to dig for them, it will be worth it.
I like the American attitude about business ‘failures’ – that you’re not really successful until you had 3 businesses go to the wall!
In a nutshell, I think you walk away when:
1. The financials (past and projected) tell you it’s not working and it’s not going to work.
2. When the stress of owning a business consistently outweighs your return – in terms of money, fulfilment and life.
3. Your gut is telling you it’s over.
– You started your business because you probably had a dream of more freedom. Yet unfortunately for most, that dream can become a prison. Life is too short and there are many other opportunities out there. If it comes to it, letting a business go, while stressful and unfortunate is not the end of the world. In fact, it can make you, if you’re open to the lessons.
As I wrote at the start, this topic is huge and also depends on the person and the industry. One answer does not fit all situations, but I hope the above helps.
Please share your comments or questions to see if we can add further insights.
ps – There’s also a short and very easy to read book by Seth Godin worth checking out called ‘The Dip’. The tag line is ‘
The Extraordinary Benefits of Knowing When to Quit (and When to Stick). In it tha author talks about ‘The Dip’