10 Signs It's Time to Shut Down Your Startup or Corporate Venture – Expert Opinions
When is it time to call it quits? We asked ten seasoned CEOs and founders this tough question. From loss of passion and perseverance to consistent cash burn and lack of traction, they shared key signs about when it might be time to shut down your startup or corporate venture.
Loss of Passion and Perseverance
Realizing What You're Selling Isn't Selling
Declining Profits and Lack of Growth
Negative Cash Flow and No Profitability Path
Multiple Unsuccessful Pivot Attempts
Stagnant Growth
Persistent Financial Troubles
Rising Costs and Decreased Customer Retention
Operating at a Loss for Over a Year
Consistent Losses and Lack of Market Traction
Loss of Passion and Perseverance
Aside from financial runway, the number one sign has to be the diminished will to persevere, or motivation to push through the unknown and uncomfortable, simply a loss of passion for the business.
As an entrepreneur and business leader, recognizing this can be tricky because much of the early stages of starting a business require sitting in discomfort. So, admitting to yourself that you've gotten to the point of no return can be challenging to discern, and requires a high level of self-awareness and humility.
No business owner sets out to fail, but if you neglect the inevitable and opt to just "go down with the ship," you can end up doing lasting damage to relationships you've built with customers and employees.
Brett Pharis, CEO and Cofounder, Vital Brands LLC
Realizing What You're Selling Isn't Selling
Running a business typically begins as a passion project, so I wouldn't normally tell a business leader to close up shop until we've tried to rectify the situation. If you have started your business, or are a leader in a business for the wrong reasons, that will become apparent pretty quickly. It's not an easy decision by any means, and it doesn't mean you failed.
The moment you realize what you're selling, people are not buying, is the time when you need to be real with yourself and take a pause. This could happen for several reasons, and don't automatically assume you fully understand the issue.
Here are a few areas to look into: (1) your internal business is not set up to scale or retain good talent, (2) you're unclear about your target audience, (3) you haven't mastered the art of selling what people want, not what you want to sell, (4) cash flow. You can head back to the workforce while figuring out where you can improve your business venture.
Amanda Russo, Founder and CEO, Cornerstone Paradigm Consulting, LLC
Declining Profits and Lack of Growth
A clear indication that it is necessary to close down your startup or corporate venture is when you consistently experience a lack of growth or declining profits. We can see this as stagnant sales, a decreasing customer base, or declining revenue and profit margins.
When a business cannot generate enough revenue to cover its expenses and grow, it becomes unsustainable in the long run. This can happen because of a variety of reasons, such as market saturation, changing consumer preferences, or over-saturated competition. In such cases, it may be more beneficial to shut down the business and cut losses rather than continue struggling and risking further financial harm.
Mark Buskuhl, Founder and CEO, Ninebird Properties
Negative Cash Flow and No Profitability Path
The most important sign that it may be time to close shop for your startup or corporate venture is consistently negative cash flow without a clear path to profitability.
When your business consistently spends more money than it generates in revenue, it becomes financially unsustainable. While startups often operate at a loss in their early stages as they invest in growth, there should be a reasonable expectation of reaching profitability within a reasonable timeframe.
If your venture has been running for an extended period, and despite your best efforts, you're unable to see a clear path to turning a profit, it's a critical warning sign. This may mean that your business model is not viable, your market is too saturated, or your expenses are too high to support sustainable operations.
Continuing to pour resources into a venture with no realistic path to profitability can lead to mounting debt, strained resources, and potentially harm to your personal finances.
Bruno Gavino, Founder, CEO, CodeDesign
Multiple Unsuccessful Pivot Attempts
Pivoting isn't a sign of failure; it's a strategy most startups implement when things aren't going according to plan. However, when multiple pivot attempts don't pan out, it might be time to ask yourself some hard questions. It's often a sign that your vision for the product or service you're offering just isn't clicking with your target audience.
Maybe the market isn't interested in what you're selling, or perhaps you haven't hit on the right value proposition. That said, the lessons you've learned from those failed pivots will be invaluable in your next endeavor.
Ewen Finser, Founder, The Digital Merchant
Stagnant Growth
One key sign it may be time to close shop is a lack of growth in your startup or corporate venture. It's natural for businesses to go through phases of slow growth, but if you've been stagnant for a significant amount of time, it could be a sign that your business model isn't working.
You may have exhausted all possible markets and customers, or you may face intense competition that is hindering your growth. Whatever the reason may be, if you're not seeing any significant growth in your business, it's time to re-evaluate and consider shutting down.
Zach Shelley, Founder and CEO, A-List Properties
Persistent Financial Troubles
One big sign that it might be time to close down your startup or business is when money troubles just won't let up. If the business is struggling to make money, cover its bills, or get the funding it needs, it's a clear signal to take a hard look. You've got to ask yourself if the way the business is set up is still working, considering the challenges it's facing.
Alex Shekhtman, CEO and Founder, LBC Mortgage
Rising Costs and Decreased Customer Retention
In 2017, I was in a small business that had constant or rising employee costs and simultaneously decreased willingness for customers to pay and renew contracts. While you can endure a paradigm like this, it does not end up in a great place. At that point, the best choices were to make a major strategy shift or pack it up.
Trevor Ewen, COO, QBench
Operating at a Loss for Over a Year
When you operate a business for more than a year without breaking even, that's more than a hiccup—it's an urgent wake-up call. Not only are you not making a profit, but you're also watching your venture siphon off funds from your other income sources. The financial stress compounds, creating a snowball effect that becomes increasingly hard to control.
At this point, you have to ask: "Is this sustainable?" If your business is consistently costing you, both emotionally and financially, and you're sacrificing other more lucrative opportunities to keep it afloat, then it may be time to make the tough call to shut it down.
Nikhil Jogia, Managing Director, Jogia Diamonds
Consistent Losses and Lack of Market Traction
One key sign that it's time to shut down your startup or corporate venture is if you're consistently losing money. If you're not making any profit after several years, it's probably time to close shop. Additionally, if you're not meeting your goals or you're not gaining any traction in the market, it's probably best to cut your losses and move on.
Matthew Ramirez, Founder, USMLE Test Prep