With the inherent pressures of being an entrepreneur combined with the harshly competitive nature in achieving excellence in business and startups, it’s no wonder that entrepreneurs often find themselves between a rock and a hard place when it comes to the continuing operation of that startup.
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Feeling the heat while your startup teeters on the edge of profitability and begins to dip into the negatives isn’t all that uncommon a scenario. In fact, a majority of startups fail, and even those that are successful usually live through a history of perilous financial or organizational situations. Entrepreneurs themselves are inspiring to the rest of us because of the weathered nature of the character or their tenacity, like in this list of success stories and struggles.
Drawing on this list of stories and on the telltale technical aspects of a startup that’s on the verge of the reaper’s scythe, let’s consider the different measures you can implement to stem and remedy unfavorable situations and endeavor through hard times for your startup.
Don’t Panic
The absolute first thing you need to do is stabilize your emotional assessment regarding the entire situation, including all your feelings about potential failure, bankruptcy, and the whole host of similar feelings that inevitably begin to accumulate and well up within you.
While this appears to be a trivial matter in comparison to mounting financial and organizational issues in a startup, reigning yourself in is the first step to re-establishing control and direction for your business. You’d be surprised at the number of CEOs who’ve hit it big, but initially reached for a cathartic drink during their lowest moments. You’re the one that’s going to be powering through this, so it’s critical to actually build yourself up to taking up that menacing task.
Observe And Systematically Eliminate Harmful Financing And Business Practices
After you’ve taken the step of slowing down for a moment and relaxing, beginning to evaluate why your startup is in this unenviable position to begin with should be your next concern. Taking a breather sometimes allows for a miraculous recovery in our ability to evaluate and judge the subtleties of a situation.
Simply taking a look at the management process behind the funds and other financial instruments of the company like stocks will give you a number of insights regarding the health of your company.
Does your company often keep financials and similar information a secret from employees or significantly dilute the shares of some of its employees? Is the company always trying to raise funds and does it use and burn through money a lot faster than it can grow? Does your business have a clear handle on how to acquire more money or the unit economics of doing business?
This is just a basic list, but with a bit of your own research and with a bit of dedicated thinking to the contingencies of your company, there are bound to be a number of similar questions you can ask that will have an actionable bearing on the success of your business.
Evaluate How Well Your Startup Fits With The Market Demand
As humans, one of our distinguishing traits is that we are not perfect. Instead, more often than not we are more prone to making mistakes or oversights than we are to perfection. Then, it comes as no surprise that some of the biggest pitfalls and reason for failure in business simply arise from incompetence and an inability or lack of effort to objectively analyze market trends and adapt to them.
Check out this great breakdown by StatisticBrain separating the startup failure rates across time and industry, but also according to reasons for that failure. The principal reasons may be shocking on the basis of common sense: emotional pricing, living too high for the business, nonpayment of taxes, no knowledge of pricing, lack of planning, no knowledge of financing, and no experience in record keeping.
Those are the most basic things, the things that you as an entrepreneur have a responsibility to account for to ensure the basic survival and health of your startup. Beyond these, there is another dimension of things to consider, like responsiveness to users or lagging or stagnant growth (less than 5% week over week).
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Conclusion
Powering through hard times for your startup really is an issue of your ability to identify and troubleshoot issues with your startup. Reorienting yourself with regards to your goal and refreshing your objective perspective of the situation is the first step. From that point, we must undergo an exhaustive investigative process regarding the hidden reasons for failure. Checking for detrimental business or financial practices and evaluating the fit of your business with respect to market demand constitutes two facets of how you might approach and remedy this issue. The reality is much more complicated, as you will have to consider even more variables such as the composition of interpersonal relationships that comprise your management and company culture to get to the bottom of the inefficiencies and issues that have put your startup on edge.
