Knowing when to hold ’em and when to fold ’em

 

losing handI’ve started a lot more companies than I’ve finished. That’s undoubtedly because my business ideas weren’t very good. I’m a journeyman entrepreneur, just like Bill Parcells, Bill Cowher and tons of other coaches were journeyman players. I made it to the major leagues several times but just hit a few singles.

So net net I have as much experience closing companies as starting them! The Forbes article 13 Signs That You Should Walk Away From Your Startup Business is a pretty comprehensive list from members of the Forbes Coaches Council. Rather than annotate or reiterate this list I’ll just provide a few reasons that aren’t touched upon by the Forbes Council.

First of all if you have actually started a business there a lot more people involved than just you: management team, staff, investors, customers, advisors, and friends of the company. You need to judge your impact on these stakeholders. You might even seek their counsel if you are on the fence about your decision. But that’s a very delicate path as you could panic people. Best to find advice that is not connected to the company. And are you walking away from the company or from being an entrepreneur? If you leave your team and investors in the lurch you may be doing the latter.

You may have fans but not customers. I’ve made this mistake more than once. It doesn’t matter how many people think your idea is great and love what you are doing. What matters is paying customers and repeat business. Don’t let yourself be fooled by good reviews by the critics; numbers don’t lie.

You reach a stalemate with your co-founder. While we agreed that my original business plan wasn’t working our agreement stopped there. He wanted to go in one direction, I wanted to go in a totally different direction. Similarly you may be at loggerheads with your investors. It can then be better to walk away, gracefully, so you can get to play another day. (It turned out we were both wrong, but because he stuck it out he ended up winning at the end of the day with yet a fourth direction.)

There’s a competitor you can’t seem to beat. I made the mistake of somehow missing a competitor that was even in my same neck of the woods.  Once I saw the head start, customer base, and reputation this company had it was clear to me that we were so far behind them it was unlikely we could catch up. The investors appreciated my willingness to shut the company down rather than trying to raise more money and we parted on good terms.

Your original business model is wrong and you can’t find a new one. Business model is just bus speak for how you make money. If the assumptions you made about who will pay you and how turn out to be wrong often you can pivot. But I’ve seen companies pivot so much they get dizzy. This behavior, otherwise known as thrashing, a term borrowed from software development, is a strong signal you need to shut things down.

As the saying goes, if you fail, just fail harder the next time.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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