Red Flag Signs That Show It's Time To Walk Away From A Startup

Being an entrepreneur is no easy task. There will be many challenges that you face along the way and not all ideas will work out. The key to being a successful entrepreneur is knowing when to walk away. You hear of heartbreaking stories where entrepreneurs spend their life savings, yet they still have little or no sales.

When you’re personally invested in your business, sometimes emotions blur your judgment. You may believe in your business but being successful is more than standing behind your ideas. In fact, 90 percent of startups fail. When things aren’t going you way, it’s critical that you step back and see if it’s time to walk away and move onto your next idea.

Knowing when to walk away from an unsuccessful startup is a skill in itself. For some, they recognize that clients aren’t responding and money isn’t coming in, so they rework their strategy. In other cases, changing your business plan could be a good move. Other times, however, it will be important to simply walk away and accept that your business isn’t working.

Don’t feel as though you’re failing either. Most entrepreneurs will need to make this decision at one point or another. By recognizing the red flags of a failing business idea, you’re the opposite of a failure. To point you into the right direction and successful mindset, here are some of the key red flags to look for.

See Also: The Best Predictor of Startup Success

1. The Financial Risk of Continuing Is Far Too Great

When you start any new business, there will be some level of financial risk involved. Of course, no one starts their business with the attitude that it will flop. Many are eager to get their startup off the ground, initially funding it without hesitation. With that being said, if there’s no money coming in and all of your money has run dry, what does that tell you?

Perhaps your business plan is solid, but you don’t have enough cash to get you to where you need to go. On the other hand, many startups create financial risks by not having a strong enough plan to secure outside investment. If you’re a new entrepreneur, it may be best to start with an idea that requires a modest amount of startup funding. Why?

Well, investors aren’t likely to take a risk on you. If your business requires a lot of cash to get up and running, you could bleed your personal funds and then place your assets at risk. Nobody wants to lose their home because they didn’t pick up on financial red flags.

If you can no longer cover the cost of your raw materials, you aren’t hitting your financial milestones, you’ve run out of investment options, you can’t pay your employees, or you’re simply sinking at a rate that puts you and your family at risk, you need to revisit your business plan.

2. The Passion Is Gone

If you’ve lost the fire inside of you, and the passion has completely burned out, it may be in your best interest to walk away or sell your business. As a business owner, there will be days where you’re frustrated and tired, but if you reach a point where you’ve lost all drive and passion, your business could be in serious trouble.

If you aren’t passionate about what you’re doing, it will show. In turn, this will affect your team and your customers. Without being passionate, it’s harder to stand behind your startup and provide the high-quality products or services you originally promised consumers.

You have to feel good about your business. If you have lost the desire to really push forward, you have a much greater chance of failing. When you’re no longer into it, you compromise your ability to turn a profit, to protect your business, and to promote it. If this is the case, there’s really no future for your startup. If you have already tried to refocus and love your business without success, this is a clear sign that you should potentially walk away.

3. Your Competition Is Dominating the Market

One of the greatest risks involved in startups is simply your competition. If there is an area in the market that could potentially be profitable, you can bet that there are already people heading in that direction (if related businesses don’t already exist).

Unfortunately for startups, competition is cutthroat, and some competing businesses will show little mercy. They will do everything in their power to beat you at your own game. Whether they outspend you in regards to marketing and advertising or simply have a better approach to their customer base, you need to recognize when the competition is too stiff.

If you have already tweaked your business to try and fill the gap between you and your competitors without any success, you need to reassess your startup and its potential. Don’t continue to chase powerful competitors because you’ll end up getting crushed and threatening your personal finances. Either offer something unique that your competitors can’t or create a new idea that will allow you to reach a greater customer base.

4. A New Opportunity Arises

Sometimes, you come up with an idea that is simply a better opportunity. Even if you’re invested in your original startup, you need to take a look at some of the other factors mentioned above. Is it truly working? If you have a new and better idea but you don’t want to abandon ship, think about the potential of your new idea.

Recognizing when you have something and when you don’t, is critical to any new startup. If your new idea will allow you to receive funding and support that is lacking in your original business, making the switch may be a wise choice.

Sometimes, entrepreneurs make incorrect assumptions and then experience challenges when trying to fund those initial concepts. If your new idea is one that will allow you to hit the market hard, this may be in your best interest. Walking away from a weak idea to tackle a stronger one will help you avoid detrimental loss.

5. Your Targeted Market Is Shrinking

If the demand isn’t there, it will be tough to stay afloat. If you are currently in a market that is on the decline and long-term growth is out of the question, this is a big red flag. Sometimes, failure has nothing to do with your product or business plan, but the industry itself. If an industry is struggling, it can be challenging to break through.

A declining industry threatens development, growth, and success. If you have noticed that demand is quickly declining, this is a key warning sign that you may need to consider targeting a new market. Either you can rework your business so that it appeals to a new and thriving market or you’ll need to walk away and start a new venture.

Although it may be heartbreaking to walk away from your startup, understand that it’s for the best. Any successful entrepreneur will tell you that failure is a learning process that drives success. If your heart is still in it, look at where you went wrong. What was it that did not allow your startup to soar?

Moving forward, implement what you’ve learned to develop better future ideas and new potential startups. Don’t get discouraged if you don’t succeed. With the right attitude, drive, funding, and support, you will find your niche and push through. Remember, there is zero failure in walking away from a startup that is sucking the life out of you.

See Also: 7 Lessons Learned From Successful Startups  

Have you ever had to walk away from a startup? How hard was the decision?





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