From conceiving a business idea to working hard, day and night in materializing it and eventually launching it in physical form is a commendable journey. However, the most basic mistake any founder of a startup does, is to push back the thought of a gracious exit. Why I say gracious is because when you have spent so much time in bringing your vision and start up business idea to life, one would only want it to continue to bear fruits, if not in your hands then at the hands of another. Think of this as a daughter being wedded off. You have raised her in to a confident and well-groomed lady who is capable of being self-sufficient, but you would want to give her away to, if not more but equally capable and responsible hands.
Likewise, for every founder, it is only natural to exit from a business they launched which has now reached its optimum plateau. But when is the perfect time to exit? How does one know that their start up business idea has become stagnant and needs new brain cells to exponent the growth? Sometimes, the startup businesses don’t actually stagnate but they are simply not going in the direction that is intended for. Hence, they end up in a continuous loop of centralizing and experimentation.
Exiting is no way quitting. But it is a decision taken at the right time which only saves money, time and effort. Exiting a startup business is not only confined to those areas where the startups ideally do great or have found new investors. There is no shame in looking for ways to exit the startup business when it is not what you envisioned it to be. Simply put, when it is becoming a failure or too risky.
There are simple indicators for any startup businesses to mark the point of a gracious exit. Following is a list of the most common ones:
1. Product Does Not Fit Demand
Your products are unable to meet the demand. I believe, this is the point where a big red light should start flashing in front of your eyes. If you can’t produce something that meets the targeted audience, then a major chunk of the purpose of launching your business falls off. You can re-launch the product or customize it to the demands, which works for most of the startup businesses but don’t get engrossed in this cycle. If not, then you need to think of a new product or a new brain to handle the product. Either way, a choice of an exit route is suitable.
2. Limited Loyal Customers
You have a limited number of loyal customers. This is good in a way that you still have a few ‘repeated customers’ that have a look out for your products in the market but it doesn’t bring in any new customers. Eventually, your sales become stagnant. This helps in sustaining the business but hinders the growth and expansion of your startup businesses. So, to grow your business, you need to explore suitable exit routes.
3. Product Does Not Fit Market
Your products no longer fit the market. Initially, when you launch a product in the market, you undergo an analysis of the demands in the market and then come up with a product to sell. However, as the technology trends change, the demands change, the needs of the customers change and so, the market changes. Thus, you are left with a product that need to fit the new market. Either you re-work it, re-launch it with changes or find new investors that can promote the same product to a wider audience with better strategies. All in all, it will be less risky and costly than to continue with the old way. If not, then it is time to look for the exit routes.
4. Financial Decisions
You have spent a considerable amount of money on areas that didn’t need that many finances. For startups, it is very crucial to prioritize where their money will go and when. This is because for the first year and a half, they have to spend out of their own pocket till they find a good investor. But, sometimes when hasty financial decisions are made and more money is spent let’s say on the product designing than the marketing, then you will have less chances of promoting your product in the market. Evidently, you will attract less investors and so, less capitalization happens. Once, you reach this point where your money runs out, and you have no investors, it is time for you to exit.
5. Losing link with your vision
When your product no longer supports your vision and values. The foundation for any start up business is the vision that it was built on. Once, you lose link with your values and deviate from the main essence of the business, it shows in your product and eventually in the decline of your sales. This distraction and lack of focus is risky and may even lead to the possible failure of the business idea. If you have reached this point in your startup business, then it is only logical to look for exit routes rather than to continue with a distracted mind.
Conclusively, these are very generic, yet common indicators of when a startup business founder needs to look for possible ways to exit in way that is also, in a way productive. However, YOU, are the perfect person to identify if, when or how to exit.
- Finance / Legal