One of the harder conversations I have on an infrequent but recurring basis is meeting with entrepreneurs who are gung-ho, motivated, and excited about their stalled startup. Of course, they don’t want it to be a stalled startup. They want to keep growing and expanding, but for whatever reason, it’s not in the cards. Last month, I had one such conversation with an entrepreneur who had built a small business with many customers. Yet, no matter what he tried, the growth wasn’t there. Over the course of many years, he had willed the business to a sustainable size with a dozen employees, but the ceiling had been reached. Unfortunately for entrepreneurs, this is one of the most challenging situations. After years of blood, sweat, and tears to build a business with paying customers who love the product, and a strong desire to grow, it becomes clear that, at this moment in time, with this product and this team, further growth isn’t going to happen. For this particular entrepreneur, I asked a series of questions: If you weren’t working on this business, what would you do? If you stepped away from the company, what percentage of your growth plans for next year would be achieved? If you found a buyer and sold the business, what would the acquirer do with it? If you could wave a magic wand, what would you change about the business? Knowing I will never know as much about the startup as the entrepreneur does, my goal is to get them thinking from a first-principles perspective about where the company is headed, what’s best for the business, and what’s best for them at this stage of the journey. As expected, this is often a difficult and awkward conversation for the entrepreneur. Everyone—rightfully so—tries to be supportive, encouraging, and focused on helping them continue to grow the business. However, sometimes the entrepreneur has done everything in their power, and it no longer makes sense to continue down the same path. As an entrepreneur, operating in these gray areas, where there’s no perfect information and judgment calls must be made, is part of the journey. Sometimes, the call that needs to be made is to move on and find a home for the startup so the entrepreneur can make things right by the employees, partners, and investors. Then, the entrepreneur can start their next journey. When further growth and new milestones are no longer achievable, it may be time to evaluate all opportunities and consider whether it’s time to move on from a successful startup.
It’s great you do this. I think in general folks have to be super careful here or the obvious answer will be they have something better to do with their time. Can you reaccelerating growth? Probably not. But it’s all hard. A story of a startup I was the first investor in that rocketed to $15m and then grew 0%. For quite a while. They could have quit but they didn’t. And sold last year for almost $300,000,000: https://www.youtube.com/watch?v=3VQtBp1KJVU
This is what I call “riding a dead horse”. Most surrounding the entrepreneur are too polite or timid to point out the horse is dead, but everyone can see it except the business owner. It is a tough conversation. But unless there are obvious pivots or corrections to be made (eg the horse CAN be revived), best to bury the horse and move on to a new journey with fresh horses, trains, cars, jet engines, or (hopefully) rocket ships which take off.
Thank you for sharing these valuable insights. It's crucial for entrepreneurs to recognize that sometimes the best decision for the business and their personal growth is to pivot or even exit. An additional perspective to consider is leveraging the current customer base and market knowledge to explore adjacent opportunities or complementary products. This could breathe new life into the business without starting from scratch. Moreover, engaging with mentors or advisors who have navigated similar crossroads can provide fresh viewpoints and strategies. Ultimately, the entrepreneurial journey is about adaptability and resilience, and knowing when to make a strategic shift is a testament to an entrepreneur's wisdom and foresight.
This is important stuff. Most of what one reads has to do with never quitting, etc. But there are times when quitting is the proper course and your questions provide a useful framework for considering that decision.
The pain of releasing the identity was what really kept me going I built a big brand but despite the revenue and follower/customer growth, the costs just never added up to it being worth all that effort and I made the difficult decision to walk away in 2021 letting it go was really difficult- I used to yearn for an honest circle of feedback and mentorship. I think I would have made better, faster decisions if I had more support back then. That’s why I prioritize mentorship and not being the only decision maker in my current phase- I grow from being surrounded by people that ask hard questions
Great questions, much needed for him since he’s inside the tornado and has probably lost objectivity. It reminds me of what Peter Drucker said: if you wake up one day and don’t want to be in that business any longer, you have 3 choices. Fix it. Sell it. Close it.
1. Selling a company to PE rarely makes things right by your employees. 2. Who are the “partners” who a founder owes “making it right” to? 3. Investors definitionally have misaligned interests with founders- especially at this point. Serving them instead of your talent is stupid. Building companies does not occur naturally on a ten-year VC timeframe. Ovitz knows. It takes a long damned time if you are working against a worthy problem. “I don't know a founder that l've worked with anywhere that isn't driven like the snow. And if you can't keep that pace up for 20 years, and I mean that, there's no business l've ever seen that can get up and running in under seven to 10 years. I don't know why it's that number. But if you look around and start seeing when did businesses hit critical mass, it's seven to 10 years.”
Wow, great post! A trusted set of advisors who know you well, have a diverse background and expertise in business will go a long way in navigating that topic. Making a decision like that in isolation would easily end startups given the frequent ups and downs that truly were close to more “________” — so be wise. This, however, is an excellent perspective David Cummings and one to consider especially as the year closes and we think about goals for next. It’s also good to note that success to one looks different to another. Living in your purpose and feeling loved in the process, both in work and life is far more valuable than gold. Promises made matter though too, so there’s much to unpack and that’s where trusted counsel is wise. Stay hungry, stay foolish. 🚀🚀🚀
I feel like you are telling my story. I by all means had a successful business but decided it was time to separate myself from it, take some time to recharge and think through things, and build again. Lots of people don’t understand why given my age. But sometimes personal and business growth comes by pruning.
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22hI’ve felt this. The challenge for an entrepreneur is figuring out when it’s time to stop vs the default to keep fighting (which is what you naturally want to do). Most entrepreneurs always feel like they’re one insight away, one feature away, one customer away, one change of the messaging and who you’re targeting. At Rigor (acquired by Splunk), when I started there we were a few hundred thousand in ARR and we were only targeting e-commerce businesses. Around 2014 we figured out that a big metrics change (ad viewability) in the online publisher market (ie NYT, CNN, Viacom, Condé Nast) was a big opportunity for us to tailor our messaging and focus our efforts in that direction as well. This was a huge catalyst for us and accelerated our growth to $1mm ARR and beyond, with many of our largest customers being publishers. Sometimes you ARE one thing away. And if you don’t continue to believe that or stay curious, you definitely won’t be. What should entrepreneurs look for when deciding to shut things down vs continuing to fight?