I had the pleasure of hearing Dianne Buckner of Dragons’ Den speak recently and in her presentation, she shared her observations about what makes a successful entrepreneur.
She mentioned a few of the characteristics that you might expect, such as being curious, the ability to spot opportunity, and confidence. But she also touched upon a trait that doesn’t get a lot of ink in the business press: knowing when to quit.
We quite often hear stories about entrepreneurs who beat the odds or who slogged and struggled for ages before finally catching a break. It’s no wonder these tales are popular, as they are examples of the archetypal hero’s journey: the epic struggle, the sacrifice, the reward. Like fairy tales, they comfort us when we are going through our own rough times.
There is also a psychological basis for the appeal of these stories: in general, people will work harder to avoid a negative outcome (e.g., admitting defeat) than they will work for a positive one.
In real life, though, not every story has a happy ending. And the ability to admit that your own journey will not end well is a crucial but often overlooked characteristic of successful entrepreneurs.
“Say what?” I hear you asking. How can you be successful if you give up?
It’s simple: knowing when to throw in the towel allows you to regroup and start something new when you still have enough resources to make the second try work. It allows you, as I noted above, to stop throwing good money after bad.
This can apply at both the macro and micro level of your business. For example, at the macro level it’s critical to be able to quickly determine whether your business really has potential. There are several factors to consider here. Is the market untapped, or is it already saturated with other providers? Is my product or service different enough to set me apart from all the other players? How well-funded are the other companies? What’s the regulatory and legal outlook for what I am doing? How is the economy?
At the micro level, an example might be that you are running a failing advertising campaign for any number of reasons: because you’ve always run this particular campaign, because you can’t think of an alternative, or because you’re fond of the venue for personal reasons. Halting the campaign would mean admitting it was a bad choice to begin with (ouch!). But the sooner you do, the sooner you will be able to spend that money on another campaign that actually provides good return on investment.
And if the market appears wide open, it’s important to curb your enthusiasm long enough to analyze why it might be that way. For as many businesses that make it, there are dozens more that were simply in the wrong thing at the wrong time or done for the wrong reasons. What looks like the famed “blue ocean” may actually be a graveyard of your predecessors.
Here are a couple more examples, this time from my personal experience, which might help you see your own situation more clearly.
Macro: Many, many years ago, my grandparents started a goat dairy with plans to sell the milk and cheese to the local market. They invested a lot of money in equipment and bought a lot of goats. But there was a problem: the local market wasn’t ready for goat dairy products and this was way, way before the foodie movement made trying new culinary experiences cool. Worse, at the time, there wasn’t even a significant local immigrant population with a tradition of consuming such dairy or even meat products. The idea was truly ahead of its time… and it lost a fortune.
Micro: At my company, we decided we needed a particular bit of software to take the business up a level. So we did our homework and selected a vendor. We then went a long, long way down the implementation path before we hit a major roadblock: the software didn’t work as advertised and worse, the flaw turned out to be the very thing we had chosen that vendor for in the first place. We tried several fixes but nothing worked. We had to decide: keep the software and limp along with a suboptimal product or grit our teeth and write off the large amounts of time and money spent?
As you will have guessed by now, we wrote it off. I won’t lie: having to make that choice still annoys both myself and my partner, and it also occasionally makes us second guess our other decisions. But we take comfort in knowing that, by cutting our losses, we aren’t wasting even more time dealing with the repercussions of a bad solution.
Those of you who remember the dot-com boom and bust will recall that some companies burned through astonishing amounts of cash before finally running their business into the ground. Just think what they might have accomplished had they done a gut check and started something better.
Chandra Clarke is the president of Scribendi.com, an award-winning, ISO-certified company that provides document-revision services to corporations and SMEs around the world. She blogs about the issues particular to female entrepreneurs at NeverPink.com.
More columns by Chandra Clarke