Updated 1 decade ago
Besides the practical knowledge which defeat offers, there are important personality profits to be taken. Defeat strips away false values and makes you realize what you really want. It stops you from chasing butterflies and puts you to work digging gold.
— William Moulton Marston
One of the most difficult things we do at the Jim Moran Institute is telling an entrepreneur that their business is no longer viable. It is one of those things that we do not ever, ever want to do; however, we frequently must as it comes to a point when it is in the best interest of the entrepreneur to shut the doors and turn off the lights.
In one such case, we recently had to tell an entrepreneur who had been in business for a very long time that she needed to close the doors. She was losing over $200,000 a month with no realistic alternative of turning it around. Her operating equipment was very old and in dire need of repair. Her staff had a very high turnover as many of her employees could see the handwriting on the wall. Additionally, she had less than five months of cash-flow to support these very high losses.
When we went back to evaluate the root cause of the business’ demise, we found that the industry parameters had shifted over the course of the last five years, and many more companies had entered the market. When she started the company, her services were considered very unique. Now they were seen as commodities, and potential customers were just seeking the lowest price. Additionally, this new technology enabled many of the company’s customers to provide the same type of services for themselves.
With all of these changes to the market, the margins fell in half over the last five years causing her high losses. Clearly, had this entrepreneur recognized the permanent changes in the market, we would not have had to recommend closing her business; however, she just could not accept that the industry had changed. She kept hoping that the market would improve and bail her out.
While this entrepreneur did have to close her business, in the process she has clearly learned what she can and cannot do well. She is great at sales, but not good at managing employees. Using this newfound knowledge, she is now focusing on re-engineering her life toward those things that she really wants to do and can do well.
Evaluating changes in your industry and responding in a timely manner are so critical to the success of your business. Sometimes, as with technology, these changes can come very quickly. In other cases, as with retailing, they can come very slowly. Regardless, monitoring your own company’s performance is not enough. You must also monitor changes in your industry and changes in technology.
You can do this!
Jerry Osteryoung is the Jim Moran Professor of Entrepreneurship in the College of Business at Florida State University. He is also the Director of the Entrepreneurship Program at FSU and Executive Director of the Jim Moran Institute of Global Entrepreneurship. He can be reached by e-mail at firstname.lastname@example.org or by phone at 850-644-3372.