3 Signs It’s Time To Quit A Failing Business

Once you understand when it's time to pivot or close your doors entirely you can take those lessons and move forward to new ideas, with better prospects and...

As you most likely know, the vast majority of startups and small businesses fail within a few years.

 It is possible this statistic is exaggerated, since a government study shows that 50 percent of all businesses survive five years.

So, what about those businesses that fail? How do you know if things are going sideways and and not likely to recover? Here are three signs too look for that may suggest it’s time to move onto new ideas:


1. You’re not making progress.

This is a simple one. If you cannot honestly tell yourself things are moving forward, and you don’t have new plans to execute, it may be time to call it quits.

This is not to be confused with rejection; it’s commonplace for most successful startups. There are plenty of stories where large companies have rejected a startups’ idea, only to regret it as the startup becomes a massive competitor in its own right. Think of how Kodak rejected the digital camera, a rejection which would eventually lead to its 2012 bankruptcy.

Great stories aside, most investors will reject your business idea for various reasons. In fact, investors say “no” more often than “yes.” Venture capital funding isn’t right for every business, but it’s necessary for some new companies. And if it is necessary and fails to attract investor interest for years, that can be a sign of a flawed premise.

In the worst-case scenario, you can find yourself taking on more and more personal debt without re-working your initial plans and pivoting at the right time. Rather than continuing to dig a hole of debt with no end in sight, it may be best to seek the counsel of an established business owner or mentor to decide when it’s time to cut your losses.


2. You’re not making enough money.

A founder should not start a business just for the money. In fact, investor Peter Thiel went so far as to suggest that, “the lower the CEO salary, the more likely it is to succeed.” It should be about an owner’s commitment towards a new vision or way of doing things.

Entrepreneur Steve Chou admits, “Brand new entrepreneurs are horrible at predicting how far they can get with their businesses in the short term. In fact, they often grossly overestimate how much money they can make in their first year. But on the flip side, they also grossly underestimate how much they can make in 3+ years with their businesses as well.”

There is also the fact that if you have less money coming in than going out (as you splurge on extravagant car payments, anti-aging products, and shiny new things), you are going to be a distracted and highly ineffective at meeting your financial goals.

Ask yourself: 

Am I underpricing to attract business? What does it really cost to produce this good or service? What margin do I need? And how much do I need to live on, or what kind of profit do I need?

A smart look at your business finances is essential. Upon review you may find that your business is not profitable enough to sustain you in the short-term.


3. You are not enjoying yourself.

This is the big one. The most important one.

If you’ve done your fair share of soul searching and renewed passion is not on the horizon, then it is time to let go. Virgin Group founder

 Richard Branson observed that a business owner should “remember to have fun. There is no point in being in business if it is not fun.”

You may be willing to persist in a business that is just spinning wheels for a short time, but in the long run it won’t be enough. Business presents challenges, risks and setbacks. So, if you are not having fun doing it, then those things will be be crushing burdens and you won’t have the self-motivation to get past them. You will grow to hate those burdens, and then despise your role as a business owner.

Running a business is incredibly difficult. There will be times when you wonder, “Why am I doing this?”

 However, if you ponder that question all of the time then it is a sign you are either too fearful to see it through or not passionate about your venture.


Ultimately, learn from your mistakes.

 Every successful entrepreneur will make plenty of them. No one likes to fail. But there are numerous success stories of people who failed at first, only to learn from their mistakes and become successful.

Once you understand when it’s time to pivot or close your doors entirely you can take those lessons and move forward to new ideas, with better prospects and experience under your belt. Your hard won lessons can be the first step towards another idea that could be bigger than you imagined.


This article has been edited and condensed.

Entrepreneur, attorney, and writer Benny Coen lives in New York. He is the founder of The Jewish Theatre Ensemble, director of the theatrically-released comedy Returning Mickey Stern, and creator of the first crowdsourced movie web site, CastOurMovie.com. In a legal capacity, he has participated in the review, analysis, and redlining of new media agreements with Apple, Google, and Netflix, and has regularly appeared in New York Supreme Court in all five boroughs and Long Island.


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