How do you know when it’s time to shut down the startup?

After grinding it out for a couple years, most startups are failing. Startups are hard and 99% never hit $1 million in annual revenue. How do you know when it’s time to shut down and give up? No one wants to be the person that quits, and investors made a bet on the entrepreneur, yet most of the time it doesn’t work out. That’s the game; it’s brutal.

Here are a few ideas to consider that it’s time to shut down:

  • Market Timing Not Right – Being too early is a failure. Being too late is a failure. Sometimes the timing is off and nothing can be done.
  • Too Much of a Nice-to-Have – Most products aren’t a must-have. There are only a few must-have products and entrepreneurs (myself included) try hard to convince people that a product is a must-have. Markets decide winners and losers based on need and value.
  • Value to Cost Misalignment – Some products fit a real need but the cost of customizing and delivering the solution is too expensive relative to what the buyer can afford. A product that’s a must-have but unaffordable to the audience is a failure.
  • Tiny Market – What seems like a big market can end up being a tiny or niche market. While a modest business could be built it isn’t usually worth pursuing.

Notice I didn’t say running out of money. That happens as well but scrappy entrepreneurs find a way. Deciding to quit is more about a fundamental business model flaw with no apparent pivot to make. Failure happens — don’t drag out too long.

What else? What are some other ways you know it’s time to shut down a startup?

One thought on “How do you know when it’s time to shut down the startup?

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