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?”
Great post, David. Once founders decide that it’s time to shut the company down, what’s the next step? Optimizing an exit. I discussed this in my recent article: https://medium.com/@pnadel/shutting-down-your-startup-the-exit-no-one-talks-about-f778d9d99c61#.45514bbcf