BIZTIPS - July 22, 2007
Biz Tips: Know When to Fold 'Em
Sunday, Jul 22, 2007
By Art Hill
In the words of the Kenny Rogers song, "You gotta know when to hold 'em, know when to fold 'em." In business, it can make the difference between hitting the brakes in time or plowing into a wall at full speed.
A recent article on Forbes.com by Wil Schroter, is titled "When to Dump That Great Idea." Schroter should know. He is founder and CEO of the GoBig Network, a community of startup companies.
His point is similar to Doug Hall's "Fail early, fail often." Hall is founder of Eureka! Ranch, an innovation incubator for entrepreneurs. Their point, of course, is to quickly acknowledge when your business idea isn't working and bail out before you loose your shirt. You need to give it enough time and effort to make a good decision, but according to Schroter, here are three signs that may help you decide when enough is enough.
First, paying customers aren't showing up. Sure you thought it was the greatest idea since the wheel, but if you can't get people to buy it, what's the point? He cites the "Seguay" personal scooter as an example. Investors thought it would change the world. Unfortunately, only 30,000 paying customers in six years agreed, far fewer than the number needed to sustain the business as originally conceived.
Second, you can't sustain your competitive advantage. Competitors are good. They indicate that somebody else thinks it's a good idea. But if you're losing ground to them and can't come up with a fresh way to grow market share, don't kid yourself. You're in what some refer to fondly as a death spiral.
Third, Schroter sees a red flag if you're not prepared to leave your "day job." He contends that if your idea is working, you need to go at it full time - no fear, no compromises - sink or swim.
Well, "yes and no" on this last point. Sometimes a little prudence goes a long way. Yes, your business will consume all of your time and energy as it grows, and yes, if you're serious about it, you can't afford to divide your focus. But lots of successful businesses have been launched on a part-time basis, or by one partner while the others keep paying the rent and medical insurance with their day jobs.
The best advice before ditching a business if things aren't working (or starting one in the first place), is to get help. Get guidance from your SBDC counselor, your own advisory board, or a professional familiar with your business - your CPA, attorney, etc. None of this advice comes with a money-back guarantee, but at least you won't hold 'em when you should fold 'em. Fail early and bounce back.
Content © 2007 East Oregonian