Amanda Fisher fuses accounting and technology to help improve business. Amanda’s mission in life is…
How to Know When to Call It Quits in Business
Being in business means making a profit or at the very least making sufficient money to pay yourself a wage and preferably a good wage that allows you to pay your bills and live a comfortable life.
In the early start up days of a new business venture, you will be pouring not only your heart and soul into the business, but you will also be pouring money into it too. Money to get the business up and running, creating products, creating assets and paying bills whilst at the same time you need money to pay your living costs too.
At the time of starting a business, it is important to understand as accurately as possible how much money you need to get the business up and running and how much you need for your personal living costs. Armed with this information and knowing what funds you have available, you will know how long you can survive before the money runs out. Too many people start without any idea what these numbers look like.
Even when you have estimated your costs and how long you can survive to get the business up and running, circumstances you didn’t expect or that are out of your control can derail you and extend the time period. The issue with this is that you either run out of money or are forced to scrimp and save in an effort to keep the business going. And yet, this can cause more damage to the business and your ability to build it.
I’ve recently seen three examples which highlight these problems.
The first is a business that needs a significant injection of funds in order to spread the business across the city to give it sufficient traction to be viable. The work required to do this is more than one person can cope with, and unless the effort is put into blitz the business across the city, the small reach that the owner can do will mean a sure failure of the business.
The second is a business that needs funding to market and promote its’ services. The owner has used up all financial resources, maxed out the credit cards and is at the point of having to find a job to have the funds to pay off the debt and provide living costs.
The third is a business that has been operating for decades but is suffering from more competition and a small overall market. Again, the owner has been using personal funds to shore up the business, is hardly drawing any wages at all and revenue has been falling each year for the past couple of years.
The common thread of all is a belief in their business, the use of all available financial resources and a belief that persistence will pay off. But in each case, there’s also stress, sleepless nights, fear of failure or admitting defeat, and subconsciously each of these people are sending out negative signals to all they encounter. Potential leads and customers or clients intuitively feel that something isn’t quite right and although they may not be able to put their finger on it, they’ll make the decision to buy elsewhere.
It’s a vicious cycle. Stress, worry and feeling desperate leads to less sales, and so the business spirals downwards. It is when we are positive and relaxed and thinking only of how we can help others that we create sales easily.
So, the big question, when do you quit?
And when I say quit, I don’t necessarily mean throwing it all in and walking away completely from all you’ve done, although in some cases this might be the right thing to do. No, I’m talking about finding an alternative source of income to take the financial pressure off the business so that when you do talk to potential clients or customers, you will bring your enthusiasm, passion and excitement about what you do or sell to the conversation and you will find they can’t wait to buy from you.
From a purely financial perspective, I believe that the time to make a shift and find an alternative source of income is when you still have some financial resources available, not when you’re down to your last dollar.
This is a hard decision to make particularly as we mostly think that we’re on the cusp of success and it seems counter-intuitive to pull the pin on the business at that time. Ideally, find a part-time job or a part-time consulting or contracting role that will allow you to have a few days each week to continue to work on the business. In this way, you will be making the decision from a position of strength rather than when you’re down to your last dollar, and you’re in a weak position.
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