But the reality is that even if you do everything right, there's a chance that you'll fail. Sometimes markets change. The economy can turn. An unexpected competitor may arise. You or a critical team member may become seriously ill or have an accident. There are countless disasters awaiting a new startup. And many very successful entrepreneurs admit to having failed multiple times before finally achieving their dreams.
You need to be prepared for possible failure. If not, you could lose more than your business.
As I described in earlier posts, building a startup is not only hard on you, it's hard on your family and those around you. You'll spend too much time away from your spouse and children. You'll be interrupted at the worst times and often need to be available 24x7. Relationships suffer, divorces frequently follow.
It gets worse if you fail. Your confidence will be shaken. You may get depressed. You could be even less available to those who care about you.
But absolute disaster strikes when you've led yourself and your family into financial ruin. No more savings, no more retirement monies, no more equity in your home, you've raided your kids' college funds, you've run up credit card debt, have no income, no prospects for a job, and no funds to do another startup. As ridiculous as it may sound, you could end up on the street. I've seen it happen. You can't let it go that far.
To use an overused boxing analogy, you need to know when to throw in the towel.
So, how do you know when to give it up?
In an ideal scenario, you would make this part of your business plan. Just as you set milestones for success, you should set checkpoints to assess possible failure. You need to draw lines you won't cross. These will be different for everyone depending on their financial and family situations.
- If you're single with few responsibilities, and know you can always get a job, you can probably risk it all.
- If your kids have left home and you have a nice nest egg for retirement, you can take some risk but need to know where to draw the line. You don't want to burn through your retirement monies only to find you can't get another job.
- If you have kids living with you, you need to be much more careful. You should determine how much risk you and your spouse are willing to take, and with regular checkpoints, when you need to give up on your startup. It might be a period of time, a certain amount of money spent, how much time the business takes from your personal life. It could be many things.
If at all possible, have an uninvolved observer look at your situation regularly. It could be your board of directors, a friend you trust. It might be your spouse.
In my lengthy career, I've seen many disastrous business failures that ruined peoples lives. But I decided to do this post now because of two recent startup failures. The first involved a person with no family obligations. Unfortunately, she didn't draw that line and ultimately burned through savings, retirement monies, and equity, losing her business and owing the government a lot of money.
The second involved someone with a family who originally promised to give his dream a year. He had sufficient monies to keep it going that long and wanted to see if he could make a living out of what had always been a recreational passion.
But at the end of a year, monies were not flowing in. Many of his targeted milestones had not been achieved. Could he really give up his fledgling startup after investing a year and getting others committed to his vision? When he told me he was thinking of dipping into his retirement accounts, I sent him a list of questions about what he'd learned about himself and his business opportunity over the past year. Fortunately, he did an honest assessment of his strengths and weaknesses and determined that at least for now, in the way he's approached it, he wasn't going to be able to support his family via his new venture anytime soon.
He'll continue to try to build the business part-time, but he's not betting everything on something that's not ready to support his family. He's now interviewing for positions that will enable him to make a good living. This was a wise decision.
Don't get me wrong. I'm not suggesting you plan for failure. However, I think it's critical for you to establish limits on the risks you're going to take. And somehow, you must find a way to objectively assess where you are and avoid a failure that could destroy not just your business, but your family and your life. Don't let yourself believe that even though you've missed your goals, if you just put more money and time in, you can save your business.
You're much smarter if you can walk away before disaster strikes and as the old saying goes, live to fight another day.