Albuquerque Journal

Startup reality check

Signs that your business just isn’t working

- By Howard Tullman Howard Tullman is the CEO of 1871 in Chicago.

One-thousand more startups wil close this September. Will yours be one? Should yours be one?

Now is a good time to ask yourself those questions. This is not an easy conversati­on to have, especially because there are so many other interested parties. You don’t want to disappoint them or let your team down, but sometimes the best thing you can do is step back and take a hard look at where things stand.

It helps to remember that, in most instances, you’re spending other peoples’ money — often close friends and family — and they didn’t sign up to lose their shirts. In fact, if they’re like most amateur investors, they didn’t plan or expect to lose anything. There’s not much you can do about the already spilled milk and funds that are long gone, but you can be responsibl­e and realistic about what to do with the remaining resources, and what makes the most sense for all the stakeholde­rs.

And, maybe it’s time to admit that there’s no end in sight to your “profitless prosperity” and that that elusive breakeven point keeps receding. Revenues (bought and paid for with borrowed marketing bucks) may be growing, but you’re just treading water and there’s no demonstrab­le bottom line or end game.

Taking a break from time to time to take stock of your situation makes a lot of sense. And the right time is always now.

I’ve done this kind of baseline review regularly for decades for my own businesses and for hundreds of others where I’ve been an investor, director, adviser or just been recruited to give my unvarnishe­d (and only somewhat informed) opinion.

Experience has made it clear to me that there are five signs that things aren’t going your way, and that the odds are pretty strong that they’re not likely to get better anytime soon. So, if you’re up for a reality check, read on.

My products don’t sell.

Businesses certainly need capital and talent to succeed, but they need recurring customers most of all. You can make up any number of excuses or think of a million reasons why the register doesn’t ring, but all the explanatio­ns in the world don’t really matter. Entreprene­urs fall in love with their product or service and forget Rule No. 1: It’s not what you’re selling that counts; it’s what they’re buying.

My business doesn’t scale.

If you’re content to be a small business and just get by, and your investors are happy that you’ve got a nice hobby even though they’ll never see any return on their money, then be my guest and keep struggling for spare change. But if you’re trying to build a real business, it’s got to be one that can scale; one that doesn’t depend solely on you; one that has readily replicable products or services; and one that isn’t bespoke.

No one is Superman, and starting startups is increasing­ly a team sport — not a place for one-man armies or solitary geniuses.

My story doesn’t shine.

As crazy-committed as you may be to your business, your own excitement and enthusiasm may not be that contagious. If the idea doesn’t catch fire after a while, you need to understand that the market is sending you a message. Maybe there’s a pivot in the making, but that’s often just a way of postponing the inevitable.

Early indicators of a lack of pizzazz include: difficulty in attracting and hiring experience­d people; finding it a struggle to secure follow-on funding; and hearing all too often that your solution is “nice to have” but not “need to have.” If there’s no light in the customers’ eyes, you’re not long for this world.

My metrics don’t matter.

I’m surprised how often even good managers fail to track the really consequent­ial metrics of their businesses. They focus on factoids and fantasies while their customers are looking for real results. Maybe they know better, but they don’t want to admit it.

The truth is that business success is not simply about deploying a new solution, and it’s not even about utilizatio­n of a new product or service. Success is ultimately about moving the needle and making the product matter for the end user. If your business isn’t delivering concrete and measurable improvemen­ts that enable your customers to upgrade their operations in some material fashion, it won’t take them long to discover that you’re wasting their time and money.

My service doesn’t suck.

Life would be so much better if everything were just black or white. The worst nightmare for an entreprene­ur or an investor is a business that goes sideways and doesn’t have the courtesy and good grace to just die.

In today’s hyper-competitiv­e world, it really isn’t enough to say that your product or service doesn’t suck or that you’re no worse than the next guy. If your business is just getting by and not growing or going anywhere, it might be time for everyone’s sake to put the beast down for good. Business is always about opportunit­y costs, and about what you and everyone else on the team could be doing more meaningful­ly and more profitably with the rest of your lives.

Ultimately, if no one has an appetite for your app and no one is swooning for your service, it’s time to think about doing something else. In this life, we look backward to learn and we look forward to succeed. Now’s a great time to take a good look.


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