One thing I've struggled with in more than a couple businesses is knowing whether I should quit. The only reason I stayed with my last business, Sageworks, for so long is because I had taken investor money, and I didn't want to lose money for the investors; if it were just my money invested, I probably would have quit after the first three years.
The truth is you must have complete resolution that you're going to be successful when you go into a business, but the greater truth is you never really know whether you're onto something until you get it out to market.
Most of the literature that you read (and most of the stuff that I write), is about how determined you must be to become successful. However, there comes a point at which a business is simply not going to work, and you're better off moving along.
Ask yourself these questions to assess whether you might be in the wrong business:
1. Are you really getting organic demand for your product?
I've been involved with about five startups, and I had natural customer pull for two of them; for many, I felt like I was pushing a rock up a hill. The successful businesses had very early indications that customers wanted the service or product.
In my late-twenties, I ran what I thought was an innovative coin laundromat service. Historically, there was no high-level service in that industry, and I saw a real need for a business that would provide a better service. The business worked right from day one. My projections were always lower than actual receipts.
Unfortunately, I've learned this is fairly rare. At Sageworks, I knew early on that there was insufficient demand for our first product, ProfitCents, which converts financial statements into plain language narratives about a business's performance. It took me ten years to pivot the company to products and services that help banks manage risk; these products, it turned out, had demand.
The first ten years were pretty depressing and hard on me and our employees--so, in general, I don't recommend taking ten years to find a market. If you ask me today what is most important in determining a good business, I would say it's getting the right market.
2. Is your business scalable?
Depending on your goals and how big you want your business to become, scalability of the business is also important. Scalability is the ability to grow a business with reasonable amounts of effort and planning.
If you just want a small business that you can run yourself, scalability is not a big deal since you can do all the work yourself. However, if you want to build a larger business, scalability is obviously important.
At Sageworks, not only did we not have the right product in the beginning, but the business was also not scalable. The only way to get sales was through a direct-sales model; literally, hiring dozens of salespeople to sell a product. We learned this was incredibly difficult for many reasons.
When I was in high school and college, I ran a landscaping business. I really enjoyed this business because it was a great way to stay in shape, and people always needed yard work done. But, to me, you couldn't scale something like this because there was a limit to the number of people you can hire.
3. Will you be able to sell your business in the future?
The third thing I look for in a business is: can I sell it? For example, it's relatively easy to start a landscaping business because people don't usually like to do that work on their own, but landscaping businesses are hard to sell, so there is limited ability to build wealth through them.
Related to this, I don't like to be in a business where the owner is absolutely essential to its operation. By the way, don't go too far on this point, because there are plenty of businesses that can't be easily sold but can still make a very good income.
When you're thinking about your business, ask yourself whether you're really getting demand from the market, whether you're going to be able to grow the business significantly without mammoth efforts, and if your business is one that you can sell to build wealth in the future.