The Hard Truth of Knowing When To Wind Down Your Startup

Before you get started, make sure you’ve thought through the endgame

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Every good entrepreneur starts a new business with the best of intentions. And every good entrepreneur — even the best of them — will face more than one moment during their tenure as a company leader when they wonder if this whole startup thing might have been such a great idea after all.

There are a lot of reasons why startups shut down. Starting any business is a proposition marked by a lack of security and a lack of support. In fact, those are your only guarantees.

No risk? No reward.

But there’s one particular kind of startup shutdown that can be avoided. And it’s when the founders let their best intentions get ahead of their best defense.

That best defense is belief.

A company never shuts its doors without people getting hurt

The only question is how many people and how much hurt.

This is something I reiterated in an answer to an investor’s question in this week’s issue of Teaching Startup (#84). It seems one of his portfolio companies told him they just weren’t satisfied with the traction they were getting, and they wanted to move on — shut down the company, start a new company, build a new product.

The question they asked him, which he then asked me: How do they know if and when the time is right to wind down their startup?

I gave him a pretty good answer. In fact, the answer I gave him was actually a list of questions — questions he should ask his founders, questions he should ask his fellow shareholders, and questions his founders should ask themselves.

But one thing I made very clear was that there was one question that needed to be asked before any other question:

Why are you shutting down?

The “why” question is about belief

Entrepreneurs are an adventurous and optimistic bunch. And I totally understand this. At any given moment, my 60% attention span can kick in and then all of a sudden that thing I absolutely…