Here we tackle the taboo subject that most business owners dread, the thought of giving yourself the permission to quit your business!
Running a business is never easy and knowing when to fold can be a difficult decision to make. Statistics tell us that on average, 8 out of 10 start-ups will fail so theoretically the odds are against business owners from day one. In my experience, very often closing the business is necessary as it allows the exploration and creation of a new and much more promising venture. Not quitting at the right time can lead to disaster. You can end up with bad debt, emotional stress, or liabilities that can take you years to repay.
So how do you know when you need to make that decision to quit? Here are my top indicators that it may be time to shut up shop and look elsewhere for your next business opportunity.
1. Business is Swift But Not Making A Profit
Insufficient cash flow is the top reason for start-ups to fail. An important exercise for any business is to know your break-even point and alarm bells should ring loudly when this is not being achieved. If you can’t achieve your break-even point, you’re in serious trouble. Break-even points are crucial in business and if you find that you are continuously missing the break-even point deadline, it’s time to look seriously at where the business is heading. In fact, it might be time to quit if you have given a hundred percent and have tried everything possible.
It is imperative that you stay on top of your financial metrics so you’re not suddenly surprised that even though you’re generating revenue, you don’t have enough cash flow to survive. If your business doesn’t have enough savings to survive longer than three months, you’re in trouble. Your P&L statement will give you a clear view of what your business is earning versus what it costs to stay in business.
2. The Market is Changing Around You
Consumer needs and wants are continuously changing and sometimes you can find that your business has lost its edge just from the passing of time and the developments of technology. A great example of this is Motorola. Its first big success came with car radios, which led to two-way radios, which eventually led Motorola to build and sell the world’s first mobile phone. Motorola dominated the market when it introduced the trendy Razr, the biggest-selling mobile phone ever at the time. Whilst they were complacently enjoying their top position as a market leader, boom, the market moved on to smart phones. By the time they moved out of their comfort zone, they were on the verge of collapse. So, the moral of the story is if it can happen to Motorola, it can happen to any of us.
The change in the market or conditions which are outside your control can be enough of a reason for you to quit or to make a significant change to your business so your products or services meet the customer needs. There are times when businesses fail to improvise or think outside of the box. This is particularly true when a business is operating in an environment that is sensitive to technological changes and advancements. Don’t be that business owner who is clinging onto old business models and ideas, only to find your competitors come along and meet the needs of your customers, something you can no longer do!
3. Have You Entered a Race to the Bottom
When you begin to notice a significant number of new and existing competitors offering the same services at rock bottom prices, then you have unwittingly entered the race to the bottom! Very often this can be the best indicator that it’s time to close your business. If securing the lowest price means winning the market, that’s certainly a strategy worth considering. But assuming your race to the bottom will impact inbound cash flow, you’ll likely need to adjust your expenses and the cost of doing business. Again, feasible, but you’ll want to spend some serious time analysing the finances and considering the sacrifices you will have to make to win business. Ultimately, you don’t want to find yourself in a situation where you’re sacrificing quality.
4. Your Physical & Psychological Health is Suffering
When you first started your business, it may have consumed and fulfilled you in equal measure. However, working on a labour of love or on a part-time basis can be enjoyable, it can change when you devote more of your time to it or make it a full time business. The pressure begins and the workload can start feeling more like a burden than fun. As the business owner, you are responsible for every aspect of the business, including producing goods and services, keeping the accounts up to date, maintaining good customer service, marketing and sales and the list goes on…. It’s a lot of pressure for one person to maintain and it’s no secret that many business owners suffer from occasional bouts of depression and anxiety. If you find yourself becoming unhealthy whether through weight gain, weight loss, constant fatigue, depression or heightened anxiety, then you should evaluate whether your business is worth a decline in your physical and mental health. As a business owner, you want to be a better version of yourself. You may be a little different, but not completely unrecognizable. Don’t lose yourself!
From my experience as a Business Mentor, I can sincerely tell you that the sign of a successful entrepreneur is the ability to know when it’s time to throw in the towel and move on. It’s true that one failed business doesn’t define an entrepreneur. The end of one venture often signals the start of something new and the beginning of the next exciting journey. As a result, it’s critical to identify the signs that it’s time to shut the doors on a languishing business. Remember that just because your business closes, doesn’t mean you have to give up entrepreneurship! Learn and rise.
A great example and proof of failure leading to ultimate success is Arianna Huffington, who before launching The Huffington Post had her second book rejected by 36 publishers!
Contact MentorUs Business Solutions today if you want to discuss your business.
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