For many business owners, the journey of starting a business is never an easy one. There are sleepless nights, over 13-15 hour days working on the business, the end of a social life; all this effort for the greater glory of a successful business. When you find yourself in a position where everything you’ve done doesn’t seem to yield any success it’s understandable that failure is difficult to accept. After all, you’ve nurtured and grown the business just like it were your child. You’ve invested time, effort and sweat. And because it was your passion, 24/7, it is incredibly difficult to admit defeat and let it go.
However, this is one situation where your mind must rule over your heart. Here are a few indicators to help you make an objective choice. This is probably one of the hardest business decisions you will have had to make but it is one that will save you time, money, energy and stress.
1. There doesn’t seem to be a demand for your product or service:
You’ve got a marketing strategy, you’ve secured appointments with key buyers in the industry etc; however interests never seems to convert into sales. If every expert in your industry consistently tells you that there isn’t a demand for your product, then it’s quite possible that your product or service doesn’t meet a need. It’s easy to have blind faith in your business whereas all the signs tell you the product is of no real value to customers.
2. No working capital:
Simply put, when you do not have the cash and assets required to run your business on a daily basis, then its future is threatened. If you are constantly pouring in your personal funds then your business is not likely to survive for much longer. One of the key things accountants look out for in accounts is the ability of the business to operate as a going concern i.e. operate in the foreseeable future. A lack of liquidity is one of the signs which reveal that a business is not likely to survive.
3. Consistently low sales margins:
If sales margins are low then you are constantly under pressure to generate high sales volume to make significant earnings. Secondly, if sales are on the decline, you run the risk of erasing profits and running at a loss. Thirdly, low margins leave very little room for you to market your product and you end up in a viscous circle of simply maintaining your business rather than growing it. Whilst you might believe you have a great product, you must remember that the essence of a business is to yield profit. If that’s not happening then you might as well maintain it as a hobby and stop investing money in it.
4. Increasing losses:
Most businesses are unlikely to realise a profit until the second or third year of operation. Typically you should see losses reducing and profits gradually on the rise. If you have been in business for two or more years and the losses are getting bigger and bigger, there is possibly a chance that they are only going to keep increasing. It’s time to stop before you lose any more money.
5. The loss of passion for your business:
Passion is an essential ingredient for making the journey worthwhile. However when sales are dwindling and the effort you put in outweighs the gain; it can drain you of energy. As a result, even the prospect of a new client or a sale doesn’t seem to excite you anymore or even worse, it makes you irritable. When you’ve stopped having fun and enjoying what you do, then it’s time to quit or devise a new strategy.
6. The effort and time spent is disproportionate to the benefit derived:
Running a business is hard going particularly at the start. However if you find yourself in a position where you can’t seem to see the benefit of all your hard work, it’s time to reconsider. This is particularly true when you know you have given it 100% and it yields no change. You will really have to ask yourself if it is worth your time to keep trying to make this business work.
7. There are no growth opportunities or new markets to explore:
Sometimes in business you have to be flexible, revise your business plan and explore other markets for your product than you originally thought. If you have introduced your product, or service, into different markets and your effort still yields no success, then it’s time to quit.
8. You have large amounts of stock on your shelves:
If you constantly have large amounts of stock on your shelves (and you haven’t restocked), then that’s a clue that your product isn’t selling. It is imperative that you look into why this is the case. Is your product seasonal? Is there simply no demand for it? Is your marketing strategy working? Do your potential customers know about your product? Have you been a bit lazy? These are pertinent questions that need to be answered soon in order to decide how you are going to proceed with your business.
9. Costs are spiralling out of control:
When you find yourself in a position where your costs are ever increasing, you run the risk of constantly eating into your margins and running at a loss. If you are unable to control your costs and reduce them significantly, the business is most possibly not viable.
10. Your partnership goes sour:
If you are in a partnership that worked well and there now appears to be major disagreements, you can’t seem to agree on the direction you want to take the business and relationships are strained; it’s usually a sign that your partnership might be over.
…Another door opens:
The end of a business doesn’t have to be the end of your dream to be a successful business owner or entrepreneur. The fact is you have at the very least learnt ‘how not to run a business’. Although it might have been a very expensive lesson for you, to make the experience meaningful, it is crucial that you analyse the lessons learnt and apply them when you are ready to start again.
“failure is not falling down but refusing to get up”.