#054
Is It Time to Quit? How I Decided It Was
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Undoubtedly, this was the hardest decision I’ve made as an entrepreneur.
I let people go.
I told clients I could no longer serve them.
And I made investments into the business that went south.
But the decision to close my business felt like giving the order to retreat or abandon ship. I was looking left and right trying to find a way out of the mess, but my options had dried up.
My position was no longer tenable and holding on was only going to dig the hole deeper.
I’ve talked with dozens of entrepreneurs who’ve been through similar situations, many who had businesses that initially showed great promise. They had good revenue, solid client prospects, and steady employee growth.
Unfortunately, some things are beyond your control or outside your experience to recognize the changes happening.
This article will walk you through the four common issues leading to businesses closing and offer some perspective on how to move forward.
Every entrepreneur I’ve talked with who’s shuttered a business fell into one of four categories:
1. Personal fit
2. Market shifts
3. Financial strain
4. Health and well-being
Let’s look at each of these scenarios.
Personal Fit
Sometimes, the industry just isn't the right fit for you.
I experienced this to some regard with my recruiting business. When I started the business, I was less than a year out of the military and was still enamored with the big pay days from closing a deal.
Some placements brought in north of $50k, which gives one hell of a dopamine dump.
This is why it’s important to really know your life priorities. While it’s exciting to make big money, I discovered feeling a sense of purpose is much more important to me.
I found myself unable to genuinely promote certain clients (the companies that I had a contract with) to candidates. If I wouldn’t want to work there, how could I suggest my candidates do otherwise?
This disincentivized my drive and caused me to rethink what type of business I wanted to build.
The takeaway is that it doesn’t have to be financial turmoil or market collapse that force your decision. If you’re not completely onboard with the vision, how are you going to bring others along?
Market Changes
No one saw COVID happening, and we all know how that turned out for many businesses.
Gyms, particularly, were hit hard. Every CrossFit box in a 15-mile radius of me, apart from one, is now gone. Knowing many of the owners, I can say it was little fault of their own.
It’s the nature of the business model.
Gyms as an industry have very low margins. Because people rarely travel more than 10-minutes to workout, gyms pay a premium for locations, driving up their overhead.
When the governor of California [stupidly] proclaims that gyms are non-essential (but liquor stores are…?), members start cancelling their membership as their own income becomes less certain.
No members = no revenue = financial distress.
The takeaway is that market shifts and unexpected events can prove fatal. These situations happen to even the most experienced entrepreneurs.
Financial Strain
Along the same vein as market changes, cash flow problems crush businesses.
The most common factor that gets owners in a tight spot is over-expansion. They see early success, land more clients, have increased orders, and a growing workload.
What’s the normal response?
Hire more people, buy more equipment, manufacture more products.
It feels good to grow. You’re flush with cash and you want to invest it back into the business. The problem is when you over-extend yourself with debt and liabilities without a reserve to buy runway if things change.
The biggest cost to a business is typically people. Hiring more employees becomes a liability if business slows. You’re left with the decision to lay people off (hurting your culture and reputation) or eating the cost (hurting your cash reserves).
The takeaway is that markets are in a continuous state of flux. Expecting economic downturns and properly preparing may lessen the blow, but sometimes it’s simply not enough and your reserves are depleted before there’s time to recover.
Health and Well-Being
This one is under-appreciated, but critical to consider.
I frequently use this quote to drive home the point that your business is a means to happiness, not your identity.
“The only people in 30 years who’ll remember you worked late nights and weekends are your kids and spouse.”
If you’re sacrificing your body to keep your business afloat, stealing you away from your family and destroying your mental health, there comes a point where the juice is no longer worth the squeeze.
I’m the first to agree that starting and running a business is challenging and takes a substantial amount of work. It often requires significant upfront time to build momentum.
But there needs to be an end point, or at least a reduction point.
Working 100-hour weeks for months or years on end means your systems and processes are lacking and you’re failing to delegate. At a certain point, it’s better to throw in the towel than to have an ER visit when your body begins to fail.
A Positive Spin
Having a failed business isn’t entirely bad.
Yes, it hurts your pride.
Yes, you may have substantial debt you need to manage.
But you are also walking away with a new level of experience and exposure that you didn’t have before. You’re now a more knowledgeable entrepreneur armed with information to run a business better in the future.
Just look at Jeff Bezos and Evan Williams.
While Amazon is his most famous venture, Bezos had to shut down a lesser-known startup called zShops.
This early failure didn't deter him, and he was able to integrate the concept into the broader Amazon Marketplace, which has been a massive success.
Before Twitter, Evan Williams co-founded a podcasting platform called Odeo.
When Apple announced its own podcasting feature in iTunes, Odeo couldn't compete and had to pivot. This pivot led to the creation of Twitter, which revolutionized communication.
Remember, having a failed business isn’t entirely a bad thing.
Failures are the most important stepping-stones entrepreneurs have because they drive home lessons learned in sweat, tears, and sometimes blood.
It’s a brave and commendable decision to even start a business because it sometimes ends poorly. Without sounding too cliché, though, failure is just another opportunity to succeed.
Learn from these experiences.
Don’t repeat the same mistakes.
Share your lessons with other entrepreneurs.
Then get out there and try again armed with better knowledge.
This week's Harder Not Smarter Podcast episode:
Dr. Erik Won joined us on EP 022 of the Harder Not Smarter Podcast. He and his team at Wave Neuroscience are at the forefront of revolutionizing mental health and cognitive performance through innovative technology. They offer a groundbreaking treatment for TBIs, brain trauma, anxiety, depression and a whole lot more. His experience in this area was eye-opening to hear what options veterans and first-responders have available to them beyond the traditional VA route. If you want to learn more about the cutting edge of brain and cognitive treatment, check out this episode!
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