Alexis Tryon co-founded Artsicle in NYC in 2010 to sell original art online to the masses--people wanting to decorate their homes without dropping millions of dollars at auctions. The company's early days were promising, with glowing reviews and artists signing up to sell their work on the platform every week. Venture money soon followed.
But then business plateaued. A hundred customers signed up the first year ... and the second year ... and the third year. "A hundred needed to be a thousand and then 10,000. But it never happened," Tryon recalls. So Artsicle pivoted, trying to reach a bigger market of companies looking to decorate their offices. But the slow and painstaking strategy involved more cold calling than website curation. Another new product, an online platform for artists to display their portfolios, was popular--but not lucrative. Investors started getting impatient. "They wanted us to grow big or go home," Tryon says.
Finally, in 2015, Artsicle shut down. Tryon's only regret? "We should have done it sooner," she says. "But we weren't emotionally ready."
It's a problem all too many business owners face. The hard fact is that many startups, even if they do moderately well, will not ramp up as much as their founders hope. According to the Small Business Administration, only about half of all companies survive as long as Artsicle's five years. But it's hard to know when enough is enough. "Entrepreneurs are inherently optimistic--otherwise they would not have taken the risk to go into business," says Jane W. Muir, a Miami attorney who specializes in business operations and contracts.
So, how do you tell the difference between a rough patch you should gut through and a terminal business condition? If you have money on hand and are motivated, you probably don't need to give up. Otherwise, if you're running up debt on your personal credit cards with no end in sight, start reading the signs. "When your accountant tells you point-blank that if the business doesn't turn a profit by the end of the year it will need to be closed, it will need to be closed," says Dee Bowden, who shut down Bowden Revenue Collection Services, a Frederick, Maryland-based collection agency, in 2008. (She now runs a new one, BCS Solutions.)
If you're wondering if your business is up for another year, or if you'd rather cut your losses and start working on your next project, ask yourself these questions:
Can you sell it?
Muir recommends thinking through all the options before you fold. "Is there an exit strategy that can pull you out of your insolvency? Would a major company acquire your company for the talent you possess? Can you raise investment capital by selling equity?" she asks. In the case of Artsicle, Tryon tried to sell it--but after speaking with almost two dozen potential buyers, no one committed to a deal.
Does your co-founder share your outlook?
Partners might have more--or less--patience for your company's viability. At Papaya + Post, a toy subscription service, co-founder Avni Patel Thompson saw strong initial customer interest, but repeat customers were harder to come by. "It didn't take long to see the writing on the wall," Thompson says, though her co-founder disagreed: "For her, it was just that we were still early, and this is a building period." The partners talked it over ... and over and over again, until they finally agreed to set a deadline for an upswing in Papaya + Post sales. Things didn't improve, and so they closed up shop.
Can you try again?
Thompson also realized she wanted to focus on building "a life-changing and market-changing venture," and is now taking a new run at that goal with her current startup, Poppy, a child care service. Meanwhile, by the time Artsicle shut down, Tryon had hired staff with the skill to pivot to website development--which wasn't really what the company had set out to do or what would make a lot of money. Still, Tryon, who's currently consulting, hasn't given up on the dream of running her next big thing: "I now introduce myself as a former and future founder," she says.