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 Failure Happens. Four Ways to
Do It Well).
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.
(1) My Products Don't Sell
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.
(2) My Business Doesn't Scale
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 When Should the CEO Stop
Selling). No one is Superman and starting startups is increasingly a
team sport, and not a place for one-man armies or solitary geniuses.
(3) My Story Doesn't Shine
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 You Can Pivot But You Should
Never Twirl). 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.
(4) My Metrics Don't Matter
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 Curse of Microsoft Excel).
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.
(5) My Service Doesn't Suck
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.