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Should I, as a startup entrepreneur, have a quit strategy?

Venturing into something should be weighed carefully with keeping all the aspects in mind. This includes failure as well.

It would not be prudent to jump in thinking only about success.

A person must think about 'what if it does not succeed?'

Should i have quit strategy?

37 Replies

Arthur Lipper
1
1
Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
This is one of the best questions seen in this dialogue site. For many years I have tried unsuccessfully to get business schools and other programs to include "Terminating a business with honor and dignity". I do not want to enter a lengthy dialogue now but will dig through my files and send you some earlier writings. send me your real email address.
Chuck Blakeman
5
0
Chuck Blakeman Entrepreneur
Founder, Chief Transformation Officer, Crankset Group
The worst thing you can do when starting up is to be thinking about an exit strategy. If you are in a 2-person plane and the pilot dies, and you have a parachute, you WILL exit. If you don't, you will learn how to fly and land the plane, or die trying. And learning to survive in a business isn't anywhere as risky or death-defying.

Survival is the strongest of instincts, and almost all successful startups were successful because they did NOT have a parachute. When I vet startups, it is one of the first things I look for. If they are talking about "what if" it fails, it is the single best indicator that they are not going to make it. Anybody thinking this way at startup doesn't have enough belief, passion, grit, and relentlessness to push the idea across the finish line. They also don't realize that failure is not fatal, it's just a seminar, sometimes a very expensive one.

When things get tough, and they always get tough, those with a back door will take it, at the very moment that the need for survival would have taught them how to be successful. Amar Bhide, while he was at Harvard, said 97% of businesses leave their prime objective in order to be successful. If they had a "startup exit strategy", they would leave the business instead.

It's never how good your plan is that matters, but how committed you are to the desired result. Having an exit plan from the gitgo is the most revealing lack of commitment you could have.

BTW - I see your question very differently than what I think Arthur Lipper is hearing. Figuring out how to close down a business with honor and dignity that has failed, is very different than having a plan to quit before you start.
Tom DiClemente
1
0
Tom DiClemente Advisor
Management Consulting | Interim CEO/COO | Coach
I agree with what Chuck Blakeman has already said. You do not enter a new business with a "quit strategy".

The meaning I get from your question is much different than what you do when you are facing the difficult decision of closing a company. Not knowing when to quit is a frequent error, and it is usually done too late, but that error is not caused by not planning for failure from the beginning. It is caused by the passion and belief you have in what you are doing.

First of all, in starting a business, you create KPIs and you may have contingency plans for events where you are not meeting your KPIs. But in most cases, you will not use any of those contingency plans because the situations you face will most likely not be close to what you imagined at the beginning.

Starting a business is usually a matter of running hard, facing adversity as well as successes, and learning from both. In the process, you adjust your approach and very often you go through several stages of reinventing your company. What you end up with in the end may be very unlike the company you originally planned. But it's hard to imagine how you will make those adjustments or truly reinvent your company to adjust to market conditions if you start with a "quit strategy".

So the answer is no, you should not have a "quit strategy". Run hard and adjust to every deviation from your goals. Use every resource you can muster to succeed. Whenever you face a wall, find a way over or around that wall. That's the way you succeed. In the end, you may have to admit that you are not succeeding but you do not do that until you have exhausted every avenue. At that time you will then do your best to minimize or prevent damage to employees, Customers and investors.
Arthur Lipper
1
4
Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
It is similar advice which increases both the number of failures and the damage done to the principals.
David C. MSE
3
0
David C. MSE Entrepreneur
CEO at Business Development

Arthur, I'm not sure why any business school would teach a "terminating a business" class. Teaching it as part of an entrepreneurship class suffices and is already part of numerous entrepreneurial classes. This is inherent in the overall planning of a business when one looks at burn rate, life cycles, strategy etc. The discussion falls under managing the entrepreneurial business, starting the entrepreneurial business, and entrepreneurial law.


Contracting of partners covers what happens in failure to partners and when partners leave and is woven in with the overall study of entrepreneurial law. I would argue partners who don't know where they stand for success and failure skipped the very important legal process of formation. That has zero to do with Tom's advice. A simple, "partner's should be astute with their contracts in planning for success and failure" would be a constructive added point of discussion.



Beyond that, exiting a business in terms of acquisition is also taught and the flip side of that is a lack of success. For programs that do not implement it, sure it could be covered in a class or two. In no way does it need to be a core class as success and failure is part of every business class I know of.



I am confused though. In one of your other posts you boasted you tell entrepreneurship students they should drop out if they really want to be entrepreneurs. So they would not be in class to take your class even if a college listened to you and created it! And you seriously wonder why colleges aren't listening to you when you encourage their main source of revenue leave?! It is quite humorous really. "Student's if you really want to be entrepreneurs please leave now. But if you stay please take my course on "how to fail with dignity." I think there is a logic course needed in there somewhere.



Kishor, Tom's advice is great! Everything about his post illustrates the needed passion, determination, and will to succeed mentality. Entrepreneurship embraces many aspects of psychology, and that is something rigid businessmen often fail to be competent in. You do need both sure. Yes one needs a team. Yes one needs a well thought out plan. But without drive, passion, and determination to fuel that, one has writing on paper as Chuck alluded to. And usually, the characteristics Tom mentions are what leads an Entrepreneur to build what he needs. Passion without competence and a plan wont guarantee success, but passion with competence and a plan certainly will put you above many.



The only thing I would add,is if you have a passion for your business that is a great start.But if you have that, let your mind kick in...put together a solid and detailed business plan. As you build for success, know that the flip side is failure. Keep your strategy focused on succeeding, not quitting. Have smart contracts that cover you and your partners should your company fail, but obviously also succeed. If you incorporate your company with detail, and you put together a competent business plan with equal detail in all the sections from marketing to operations..financial etc, you will know what you must achieve to succeed and you will have an honest understanding of what failure looks like. But put the word "strategy" on writing and in mind only with success.

Arthur Lipper
0
2
Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
Let me have your identity and background, with contact details, and I will respond in an attempt to help you understand the difference in the lives of failed entrepreneurs if they do as is usually the case and as it could be. Arthur
David C. MSE
0
0
David C. MSE Entrepreneur
CEO at Business Development
I appreciate the thought, but I understand very well. Thank you.
Arthur Lipper
0
1
Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
Pity. My guess is that you feel that teaching passengers how to use a life preserver* is overly pessimistic and lessens their will to live. * even though you will grant the majority of newly incorporated businesses fail to achieve the founder's objectives and that a vast majority do not become viable businesses. Perhaps you will even allow that in some cases the entrepreneur is able, subsequent to a business closure, to start one or more businesses, at times financed by the same investors as were participants in the terminated business. Possibly, you will agree that it is not necessary for the personal credit (and therefore business life) of the entrepreneur to be severely damaged by an investor money-losing corporate demise, if handled properly. There are even some of us who believe that a properly managed closure of a business can be a constructive learning experience for the entrepreneur and therefore making the individual a better bet in a subsequent venture. Arthur
Himanshu Shekhar
0
0
Himanshu Shekhar Entrepreneur
Climate Finance, Policy, Environment, Sustainability
A start up is a personification of the founder. Can the founder quit oneself.

You try and try and every time learn from previous mistakes.

But you shouldnt throw good time after bad. Make an exit strategy when there is no going forward. Close with dignity and a promise to come back.

Never make an exit strategy at start, you will only exit and never be able to start.


Tom DiClemente
0
0
Tom DiClemente Advisor
Management Consulting | Interim CEO/COO | Coach
Arthur, I do not disagree with properly closing a business, that is a must. But that was not the question. The question was one of starting with a "quit strategy".
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