The Entrepreneur Africa

How Long Should An Entrepreneur Wait Before Closing A Failing Venture?



Bonnie Foley-Wong, CEO Pique Ventures, Pique Fund, author Integrated Investing

There is no hard and fast rule as to when to formally shut down a business. How long an entrepreneur waits before closing a failing venture depends upon a combination of their vision or passion, their resources, and their tolerance.

Loss of Passion
When the passion is gone, building a business isn’t easy. It’s a roller coaster ride, rife with ups and downs. Loving what you do helps you get out of bed in the morning when you’ve had a spate of receiving nothing but bad news. Passion for your business and building a valuable solution to a problem helps you see opportunity beyond the challenges in front of you. You have to still have a vision of where you’re trying to get to when it seems like there is nothing but barriers in your way. But vision and passion alone are not enough to sustain a business.

When you’ve run out of Resources
Quite clearly if the business is using up more resources than it is creating, for a long period of time, it is not a sustainable situation. If your cash flow is negative for a long period of time, then you’re not building a business, you’re funding a hobby or a dream. If you have no way of funding your business and no one else wants to, you’re better off shutting it down and investing or spending what little resources you may have left on something else. It’s a good idea to draw a line and when your venture approaches that line, you stop. If your venture crosses over that line, you could deplete your resources so badly that it’s really challenging and stressful to even contemplate doing something else.

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When you can no longer tolerate it
At the end of the day, our decisions are driven by our emotions and your emotional tolerance may run out well before your vision or passion and resources do. Your emotional tolerance is the precursor to having a vision for your venture and being able to conjure up opportunities or tell a compelling story to secure funding. You might have a vague idea of the future potential of your venture, but if you’re fed up and simply cannot tolerate the downward trajectory of your business, then it’s time to shut things down.

Experience and resourcefulness influence the decision to shut down a business and how it’s done.
I’ve seen a situation where a very experienced entrepreneur was determined to find a way to recover at least some of his investment in a failing venture. He had come to a realisation that it simply wasn’t working in the form it was in and with the team involved. He believed in what value was left and took steps to maintain the value, even try to enhance it somewhat, whilst pursuing a buyer for what was left.

In another situation, at least one person saw a future for a failing venture, whilst bystanders called for it to be shuttered and for investors to walk away. This particular situation that I’m aware of has not yet come to a conclusion.
In both situations, the entrepreneurs had a sliver of a vision, some resources, and some tolerance to shepherd the ventures to some satisfactory, albeit less-than-perfect, resolution. Both situations were (are) long and protracted and still rife with uncertainty. If the entrepreneurs had less tolerance, they would just draw a line in the sand, make a decision and call it day.

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So before you make a decision to shut down your venture, ask yourself if you have any passion, resources, and tolerance left. If the answer is yes, be prepared for a long, hard road. If the answer is no, be prepared to take the necessary steps to communicate the difficult decision to investors, partners, staff, and other relevant stakeholders. Shut down your venture properly and reflect on the lessons learned from the experience (so that you don’t make the same mistakes in the future!).


The Entrepreneur Africa

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