Starting a business is a complex, ever-evolving task, and tough decisions have to be made almost every day. Perhaps no decision is quite so tough as when an owner has reached the crossroads where money’s tight, frustration is setting in, and it’s time to decide whether to press on or cut losses. That single decision could mean the start of a new direction for a business—or its end. Unfortunately, many entrepreneurs may not know how to make that decision if they haven’t been there before. It’s often a matter of experience and perspective. According to Forbes Coaches Council, there are several definite signs that indicate it’s time to walk away from a startup business, such as losing sight of your “why”, stopping to love the process, and inconsistent and insufficient cash flow.
Key Takeaways
- Recognizing the signs it’s time to walk away from a startup, such as loss of vision, burnout, and cash flow issues.
- Understanding the harsh realities of startup failure rates and the complexities of defining success.
- Navigating the emotional and mental challenges of the decision to quit a startup.
- Distinguishing persistence from stubbornness and identifying recurring problems as red flags.
- Embracing the lessons learned and positive reflections on the startup journey.
What if you’ve poured your heart and soul into a startup, only to be faced with the difficult decision of whether to press on or walk away? How do you know when it’s truly time to stop and start something new?
Understanding the Harsh Reality
The unfortunate and brutal truth is that most startups fail. Although the commonly cited statistic is that 9 out of 10 startups fail, some experts believe the actual failure rate is closer to 19 out of 20. This is because a good exit for one party does not always translate to a good exit for another party, such as when series B investor preferences can negatively impact founders and angels. The lesson is that entrepreneurs should not expect to win, but rather fight like they are going to.
On the more optimistic side, if entrepreneurs are willing to view every startup as a “learning experience” regardless of the time, money, and emotional/physical pain involved, perhaps they can be successful 100% of the time. Defining success and failure in startups can be complex, as what may be considered a failure for one party could be a successful exit for another.
Most Startups Fail – The Brutal Truth
The startup failure rate is shockingly high, with some experts estimating that as many as 19 out of 20 startups ultimately fail. This is a harsh reality that entrepreneurs must confront, as a good outcome for one party does not always translate to a good outcome for others involved, such as when investor preferences impact founders and angels.
Defining Success and Failure in Startups
Determining what constitutes success and failure in the startup world can be nuanced and complex. While a particular exit may be viewed as a failure by some, it could be considered a successful outcome by others, depending on factors like investor preferences and the differing goals of various stakeholders. Entrepreneurs must keep an open and adaptable mindset when assessing the results of their startup ventures.
Signs It’s Time to Walk Away
As an entrepreneur, it’s crucial to recognize the telltale signs that it may be time to walk away from your startup. According to Forbes Coaches Council, there are several definitive indicators that point to this difficult decision.
You’ve Lost Sight of Your “Why”
One such sign is that you’ve lost sight of the original reason you started the business in the first place – your “why.” When the going gets tough, it’s essential to do a gut check and ask yourself two critical questions: “Why did I start this business? Will I have any regrets down the road if I walk away from it?” Losing that foundational purpose and drive can be a clear signal that it’s time to reevaluate your commitment.
You’ve Stopped Loving the Process
Another warning sign is that you’ve stopped enjoying the daily actions of building your company. Research has shown that money alone cannot cure unhappiness, and an intolerable daily grind is simply not worth it, no matter the potential rewards. Entrepreneurs need to be passionate about the work itself, not just the end goal.
Cash Flow Is Inconsistent and Insufficient
Additionally, if your cash flow is not consistent and you’ve tried every possible way to make it work but it still doesn’t, it may be time to cut your losses. Cash flow is the lifeblood of any business, and the numbers simply don’t lie. Persistent, unresolvable cash flow issues can be a clear sign that it’s time to walk away and pursue a new opportunity.
Recognizing these critical signs – losing sight of your startup vision, burnout in the daily grind, and inconsistent cash flow – can be instrumental in helping entrepreneurs make the tough decision to walk away from a struggling venture. While it’s never easy to abandon a project you’ve poured your heart and soul into, sometimes it’s the bravest and most prudent choice to make.
When to Walk Away From Your Startup?
Knowing when to quit a startup is a crucial decision for entrepreneurs. It could mean avoiding further losses or seizing new opportunities. The article explores the harsh reality that most startups fail, with estimates ranging from 9 out of 10 to 19 out of 20. Defining success and failure in startups can be complex, as what may be considered a failure for one party could be a successful exit for another.
The article then delves into the key signs that it may be time to walk away from a startup, including losing sight of your original “why”, no longer enjoying the daily process, and inconsistent and insufficient cash flow. Ultimately, walking away from a startup is a difficult but sometimes necessary decision for entrepreneurs.
The Third Envelope Story
The article presents a compelling story about the former New York Yankees manager Billy Martin, who would leave three envelopes for his successor Yogi Berra with instructions to open them sequentially when he was ready to quit. The first two envelopes contained messages of encouragement, while the third simply said “Start looking for a new job.” This story is used to illustrate the critical difference between being down and being done as an entrepreneur.
Leaders Need to Get Up After Being Knocked Down
The key message here is that leaders need to be able to get up after being knocked down many times before counting themselves out. Persistence in entrepreneurship is essential, as it’s common for startups to face numerous setbacks and challenges along the way. The true test of a leader lies in their ability to weather these storms and maintain their determination to keep going.
Knowing When You’re Down vs. Done
Entrepreneurs must learn to distinguish between being in a temporary down period versus being truly done with their venture. Walking away shouldn’t be a result of being tired, drained, or frustrated by the normal startup challenges. Instead, it should be a deliberate decision made after exhausting all viable options and carefully assessing whether the business still aligns with the founder’s original vision and long-term goals. Knowing when to quit vs. keep going is a critical skill for any successful entrepreneur.
Going Big or Going Home
The article discusses the author’s “go big or go home” startup philosophy, which kept them challenged, fueled their ambition, and helped them perform at their fullest. They started Popinjay with the vision for it to be a $100M+ company. However, the speed of growth and scale of operation they felt inspired by started feeling out of reach, and required raising capital that was several orders of magnitude higher than what they had access to.
Startup Vision for Massive Growth
The author’s ambitious vision for Popinjay to become a $100M+ company drove them to push the boundaries of what they thought was possible. This startup vision and growth mindset kept them motivated and focused, but also highlighted the significant challenges they would need to overcome to reach such lofty goals.
Fundraising Struggles
The author also struggled with getting fundraising right – raising the right amounts, at the right time, and from the right people. They raised a total of $500k in seed funding, but waited too long to raise their next round, falling prey to the chasm between seed and series A funding. Securing the necessary fundraising for startups to fuel their aggressive growth ambitions proved to be a major obstacle.
Importance of Co-Founders
Additionally, going solo as a founder was a major deal-breaker, as startups with big ambitions require more than one person, especially for physical product companies with complex supply chains. The lack of a co-founder severely hampered the ability to effectively fundraise and recruit the necessary talent to execute their vision.
Timing Is Everything
The article emphasizes that timing is everything when it comes to pulling the plug on a startup. It takes 7-10 years to build something at scale, so founders have to be committed to doing the time and can’t fall into doubt as soon as the going gets tough. At the same time, they have to stay honest and realistic about the future, and regularly assess whether their progress is still aligned with their original vision.
Commitment for Long-Term Success
According to the Small Business Association, only a quarter of new employer firms remain in business for 15 years or more, indicating the long-term commitment required for startup success. Founders must be willing to weather the challenges and maintain their focus, even as the daily grind takes its toll.
Assessing Progress and Vision Alignment
In the author’s case, even though their startup Popinjay had recently received new funding commitments, secured new sales partnerships, and had a new creative director join, the author knew they needed much more – tens of millions, not just hundreds of thousands – to truly thrive, not just survive. The decision to walk away was the result of deliberation, self-awareness, and brutal honesty, rather than being forced by unavoidable circumstances.
Overcoming Ego, Fear, and Guilt
Deliberating on the decision to walk away from Popinjay was emotionally and mentally taxing for the author in ways that even running the startup hadn’t been. They had to overcome fear, doubt, guilt, and ego. It took a Herculean effort to be honest with themselves and remove emotions from the equation. There were endless conversations with teammates, investors, board members, mentors, and customers.
Emotional and Mental Taxation
It was extremely difficult to think about moving on from what had become synonymous with the author’s name and identity. They had lived, breathed, and dreamt Popinjay for so many years, and had pushed every boundary for it. Recognizing that they were more than just their startup was a crucial step in being able to make this decision with courage and conviction.
Recognizing Your Identity Beyond the Startup
Separating personal identity from the startup they had poured their heart and soul into was a formidable challenge. The emotional challenges of quitting a startup are often overlooked, but they can be just as daunting as the practical and financial considerations. By acknowledging their worth beyond Popinjay, the author was able to move forward with clarity and self-compassion.
How Do You Know It’s Time?
The million-dollar question for any entrepreneur is how to know when it’s truly time to stop a startup. As a founder, your risk tolerance and persistence can often keep you from seeing things clearly. Two key signs the author identified were crossing over from persistence to stubbornness, and repeatedly solving the same fundamental issues even after a year or more.
Persistence vs. Stubbornness
Persistence is necessary for success, but stubbornness can become a roadblock. Trusting your own gut instinct and listening to advisors who encourage regular self-assessment can help you distinguish between the two. It’s important to recognize when you’ve crossed the line from resilience into obstinance, refusing to let go of a struggling venture despite clear signs it may be time to move on.
Solving the Same Problems Repeatedly
While it’s common for startups to miss goals and for things to take longer than expected, constantly butting heads with the same core problems is a red flag. If you find yourself repeatedly solving the same fundamental issues and asking the same questions, even after a year or more, it may be time to reevaluate your startup’s viability. Recurring problems in areas like cash flow, sales, and market sustainability are often signals that it’s time to consider walking away.
Reflections and Learnings
Despite the difficulty of the decision to walk away from their startup Popinjay, the author now feels a fierce pride in what they were able to build. While they initially grappled with feelings of guilt, fear, and shame, they now fully appreciate the lasting impact Popinjay made on thousands of customers, artisans, and team members around the world. The products and brand will live on in the hearts and on the arms of customers who continue to carry and cherish the Popinjay creations.
Embracing Imperfection and Fearlessness
The author also learned to embrace imperfection and become truly fearless through this experience. As a former perfectionist, being imperfect and pulling the plug on years of hard work helped them let go of fear and preconceptions. This newfound embrace of imperfection has equipped the author with invaluable lessons that will serve them well going forward, as they navigate the ups and downs of entrepreneurship with a greater sense of resilience and adaptability.
Overall, the author views this experience not as a failure, but as a testament to their commitment, persistence, and willingness to take big risks – qualities that will undoubtedly continue to propel them towards future positive reflections on their startup journey and lessons learned from quitting a startup. The courage and conviction to make this difficult decision, even in the face of ego, fear, and guilt, has strengthened the author’s resolve and prepared them for new opportunities to come.
Conclusion
Knowing when to walk away from a startup is a crucial decision for entrepreneurs. While most startups do fail, it’s not always clear when the right time is to pull the plug. The article has explored the harsh realities of startup failure, the key signs that it may be time to quit a startup (such as losing sight of your “why”, burnout, and insufficient cash flow), and the importance of timing, persistence, and self-awareness in making this difficult choice.
Ultimately, walking away from a startup you’ve poured your heart and soul into is never easy, but it can sometimes be the best path forward, allowing you to preserve value, learn from the experience, and move on to new opportunities. The key is having the courage and conviction to make this decision objectively, even in the face of ego, fear, and guilt.
As you navigate the complex journey of entrepreneurship, remember that deciding to walk away from a startup is not a sign of failure, but rather a testament to your resilience and willingness to make tough choices. By staying true to your vision, learning from your experiences, and pursuing new avenues, you can continue to grow and thrive as a founder, no matter the outcome of your current startup endeavor.