Entrepreneurs are expected to hit the shot out of the park each time, and if that doesn’t happen, it is likely you are heading toward tough times.
Some statistics throw up really depressing numbers, like close to 50% businesses closing up shop after their first year, but these are just media-hyped stats highlighted for drama. Closer to 80% of entrepreneurs survive the first year, and around 50% complete five years.
It’s the five-year statistic that is a cause for concern. New businesses require close to five years for a decent ROI, so if half of the businesses shut down in that period, is that a sign of how difficult it is to be a successful entrepreneur?
With the super-success and mega-funding generated by the latest startups to hit Silicon Valley, it is not going to be easy to live up to expectations. Entrepreneurs may be America’s sweethearts, but a less-than-rosy economic scenario, an extremely tight credit situation, and an unpredictable marketplace coupled with some really damning business sins may lead to trouble in your business venture.
Businesses require more than just passion and expertise to succeed, and in many cases you may need to get plain lucky. How do you determine whether the time has come for you to let go and move on?
Here are a few compelling reasons for you to consider winding up your business.
New businesses cannot expect to make a profit in the first two years, but if you continue to bleed well into your third, it’s time to reconsider your strategy, if not close your business.
This is more important than the first. If you don’t get up in the morning with a spring in your step, your business is not moving in the right direction. You are not enjoying the process anymore, and eventually your unhappiness will reflect on your business as well.
Entrepreneurship is a 24-7 job. If you feel you cannot take the stress anymore, it may be time to reconsider your role. You should never compromise on your health. You need to be responsible and take better care of yourself, and if that means getting out of business, do it.
Many entrepreneurs shy away from taking this painful decision. Their reasons for sweeping the signs of failure under the carpet are an uncertain future, a mountain of debt, an aversion to working under someone else, and the expected loss of face associated with failure.
Success gurus, however, implore you to fail early, fail fast, and fail often. But how enjoyable is this, especially if you are in your 40s or 50s?
Failure is unavoidable if you are setting out to create something new. It may not be a pathbreaking invention, but establishing your first coffee shop is a creative process as far as you are concerned. You need to find the right location, design attractive interiors, find the right consumer segment, and launch at the right time. Your passion, knowledge, research, and planning determine the outcome, along with the aforementioned factor, luck.
To fail fast means you test the marketability of your product or service as soon as possible and think along the lines of a prototype. As soon as you see it is not as great as you want it to be, you scratch the idea and start all over again. Andrew Stanton, director of Wall-E and Finding Nemo, says that the earlier you screw up and realize your shortcomings, the closer you are to success.
But how practical is this if you are an average entrepreneur, who has sunk a huge amount of his savings into his dream venture?
4chan founder Christopher Poole is in his mid-20s and says that shutting down his more recent websites Canvas and DrawQuest put him on “an emotional rollercoaster.” Despite launching successfully on iTunes store in 2013 and garnering more than a million downloads and 550,000 registered users, Poole wrote in a farewell blog post that the business side of things had just not gone as he had hoped.
Poole illustrates that it is often best to close shop if you do not see any avenue for generating a better cash flow and decide what you want to do next.
Successful people act quickly and without fear, even if they fail. This ability to take quick and decisive action can help you turn the worst phase of your life into one of learning and growth.
So what do you do next?
This is advocated in all financial glossies and will be the best thing to do if you are a born entrepreneur. You enjoy multitasking, grueling work hours, and are mentally strong enough to do it all over again. You are young, at least in your heart, and enthusiastically in love with your new idea.
Ensure you have the financial stability to help you lead a decent life and invest in a new venture. It may be months or years before your business sniffs profit, and you’d need to hold your life together until that happens.
Evaluate your past failure and learn from the mistakes. Plan and prepare for your new venture. Leave nothing to chance and be ready for any eventuality.
If you’d developed good relationships while running your old business, it can help you find a mentor who will guide you better this time around. Be more proactive and hands-on, and keep your finger on the pulse of the market.
This is not as easy as it sounds. It will be easier for your employer to accommodate you if you’d been a business owner for less than four years. If you have been on your own for longer, you may be perceived as having a difficulty in adhering to organizational hierarchy and rules. Your employer may feel it will be difficult for you to be loyal to the company or have long-term career goals.
In such a situation, sell yourself better. It is important you stress on your business experience as something that honed your skills related to the job you are interviewing for. You may also bring to note your networking abilities and troubleshooting skills.
If your business has been in the area of your core competence, it may make things easy for you. If you are an auto engineer who had set up an automotive spare parts business, you will find it easier to return to working full-time as an employee in the auto industry. Your prospective employer will definitely see your entrepreneurial experience as a value-addition.
Your former business must have been quite a learning curve. You must have discovered new facets to your personality and cultivated a number of highly useful skills. But we can’t always go back to doing what we used to prior to becoming an entrepreneur.
If you used to be a financial analyst who went on to set up a coffee shop, going back to your investment firm may not be easy. And you don’t need to either. Your business acumen gained as a coffee shop owner must have sharpened your knowledge about the consumption patterns of coffee enthusiasts. You should, therefore, tap into that knowledge and look for job opportunities in the food industry instead.
If you have (or had) been a business owner for several years, you can consider taking up a consultancy role in a suitable industry. It will help you get back into the “employee groove,” familiarize yourself with employers and organizational practices, ease away the tag of “entrepreneur,” network with peers, and try for better career opportunities.
Losing your business is painful, but it isn’t the end of the world. Give yourself the time and space to grieve your failure but don’t forget that there is still a lot of fight left in you. Bounce back because the world moves on and so must you.