When Is It Time to Throw in the Towel?
Giving up isn't something that comes easily to entrepreneurs. We're stubborn and incurably optimistic. But sometimes, throwing in the towel might be precisely the right move.
I recently spent a long time talking to my friend Tom, who has been struggling for several years with his business. On the positive side, he puts out products that customers love, and his company has had a great impact on its community. Unfortunately, he's running a for-profit business, not a charity. Three years ago, he expected the company to break even for the first time. Instead, he lost $250,000. The following year, he had the same expectation—and the same result. This past year, he projected a loss of $70,000 and lost more than $200,000.
Now, once again, he is projecting a breakeven year. I wish him nothing but the best, but I can't help asking whether he should continue. I faced a similar dilemma when my messenger company, Perfect Courier, went into Chapter 11 in 1988. Some very smart people, including my lawyer and my accountants, told me I should walk away, arguing that it was highly unlikely I'd ever make it out of Chapter 11. My response: "What a great challenge!"
For the next three years, all I did was try to survive Chapter 11. It was torture. Can you imagine going to meetings every day where people yell at you and make threats? Yet, as painful as the ordeal was, it taught me more about business than anything else I've ever been through. The lessons I learned—focus on profit, not sales; leave managing to managers; don't make hasty decisions; and so on—turned out to be great ones. By the time Perfect Courier emerged from Chapter 11 in 1991, I had already launched my next business, CitiStorage. Without those lessons, it would not have been nearly as successful as it was.
Was keeping Perfect Courier alive worth the price? Even in retrospect, I'm not sure—just as Tom can't be sure. It's tough to walk away when you've developed emotional ties to a business, as I had with Perfect Courier and as Tom has with his company. In the end, you just have to seek the best advice available, then use your best judgment. No two people will come to the same conclusion. Which leads me to wonder: How do you, the readers of Inc. and Street Smarts, feel about throwing in the towel? Have you ever given up on a business? In retrospect, was it the right decision? Or do you regret it? Let us know below, or send your comments to AskNorm@inc.com.
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