Autumn Is the Perfect Season for This 5-Point Reality Check
The leaves are beginning to fall-- maybe your startup is, too. Now is a good time to take a deep breath and conduct a deep assessment of your business.
Another thousand startups will shut down this September. Will yours be one? Should yours be one? Now's a good time to ask yourself those questions. Winter's on the way and it seems to me that things start to get more serious as the summer slips away. Labor Day weekend offers an excellent break in the day-to-day craziness of starting a new business and the ideal time to ask yourself whether all the work is worth it. This is not an easy conversation to have-- even if you're just talking to yourself-- especially because there are so many other interested parties. You don't want to disappoint them or let your team down, but sometimes the best thing you can do is step back and take a hard look at where things stand.
It helps to remember that, in most instances, you're spending other peoples' money-- often close friends and family-- and they didn't sign up to lose their shirts. In fact, if they're like most amateur investors, they didn't plan or expect to lose anything. They all believe that trees grow to the sky. There's not much you can do about the already spilt milk and funds that are long gone, but you can be responsible and realistic about what to do with the remaining resources, and what makes the most sense for all the stakeholders. This is part of the job. (See ).
And, maybe it's time to admit that there's no end in sight to your "profitless prosperity" and that that elusive break-even point keeps receding just like the horizon. Revenues (bought and paid for with borrowed marketing bucks) may be growing, but you're just treading water and there's no demonstrable bottom line or end game. Worse yet, you've learned that the minute you stop goosing the top line with flash sales, deep discounts and shipping spiffs, things slide backwards quicker than you can say Blue Apron. People get tired pretty quickly of hearing tales of tomorrow. And smart investors have even less patience after a while.
So, too, do smart employees. You'll see those signals; when even your most supportive sidekicks are starting to look at you a little bit sideways and think a lot about their next opportunity. They're finding it harder and harder to put on a happy face in the face of the impending doom. People on the inside know too much and watch your every move much more closely so it's very difficult (and not really fair to anyone) to keep living a lie. Taking a break from time to time to take stock (no pun intended) of your situation makes a lot of sense. And the right time is always now.
I've done this kind of baseline review regularly for decades for my own businesses and for hundreds of others where I've been an investor, director, advisor or just been recruited to give my unvarnished (and only somewhat informed) opinion. And, while it's not quite a science as yet, pattern recognition still pays off more often than not. Experience has made it pretty clear to me that there are five simple signs that things aren't going your way and that the odds are pretty strong that they're not likely to get better anytime soon.
So, if you're up for a quick reality check, read on.
Businesses certainly need capital and talent to succeed, but they need recurring customers most of all. You can make up any number of excuses or think of a million reasons why the register doesn't ring, but all the explanations in the world don't really matter. Money talks and bullshit (and wishful thinking) walk. Entrepreneurs fall in love with their product or service and forget Rule Number One: it's not what you're selling that counts; it's what they're buying. Businesses that don't sell don't survive.
If you're content to be a small business and just get by and your investors are happy that you've got a nice hobby even though they'll never see any return on their money, then be my guest and keep struggling for spare change. But, if you're trying to build a real business, it's got to be one that can scale; one that doesn't depend solely on you; one that has readily replicable products or services; and one that isn't bespoke. If everything is one-off and handled by hand, a happy ending probably isn't in the script. (See ). No one is Superman and starting startups is increasingly a team sport, and not a place for one-man armies or solitary geniuses.
As crazy committed as you may be to your business, your own excitement and enthusiasm may not be that contagious. If the idea doesn't catch fire after a while, you need to understand that the market is sending you a message. Maybe there's a pivot in the making, but that's often just a way of postponing the inevitable. (See ). Early indicators of a lack of pizzazz include: difficulty in attracting and hiring experienced people; finding it a struggle to secure follow-on funding; and hearing all too often that your solution is "nice to have" but not "need to have." If there's no light in the customers' eyes, you're not long for this world.
I'm surprised how often even good managers fail to track the really consequential metrics of their businesses. They focus on factoids and fantasies while their customers are looking for real results. Maybe they know better, but they don't want to admit it. (See ). The truth is that business success is not simply about deploying a new solution and it's not even about utilization of a new product or service. Success is ultimately about moving the needle and making the product matter for the end user. If your business isn't delivering concrete and measurable improvements that enable your customers to upgrade their operations in some material fashion, it won't take them long to discover that you're wasting their time and money. Don't believe your own press--or your own marketing facts and figures-- if the impact isn't obvious to the customer, all the hype in the world won't get you to the home stretch.
Life would be so much better if everything were just black or white. The worst nightmare for an entrepreneur or an investor is a business that goes sideways and doesn't have the courtesy and good grace to just die. In today's hyper-competitive world, and notwithstanding that noted baseball philosopher Joe Maddon, ("Don't ever permit the pressure to exceed the pleasure.") it really isn't enough to say that your product or service doesn't suck or that you're no worse than the next guy. If your business is just getting by and not growing or going anywhere, it might be time for everyone's sake to put the beast down for good. Business is always about opportunity costs and about what you and everyone else on the team could be doing more meaningfully and more profitably with the rest of your lives.
Ultimately, if no one has an appetite for your app and no one is swooning for your service, it's time to think about doing something else. In this life, we look backwards to learn and we look forward to succeed. Now's a great time to take a good look.