Have you ever said, “I think I’ll start a business, but instead of success, my end goal is failure. I will give it an honest go, invest ample time and money toward this labor of love, and then watch it crumble quickly to the ground.”
That would be absurd, considering many of us type-A, entrepreneurial folk would never have accepted an F in middle school gym class, let alone a business venture. But when launching a startup, it’s a cold, hard truth that failure is more prevalent than success. The numbers vary from source to source, but Forbes estimates around 25% of startups fail within the first year, while the number rises to 55% by the fifth year. One study cites that about 75% of venture-backed startups fail to return investor funds.
The numbers vary further as the definition of failure is open for interpretation. When failure is defined as losing all of the investors’ money and liquidating assets, approximately 30% to 40% of startups fail. If failure is defined in a more liberal sense, say failure to reach projected ROI or a specific revenue rate, then rates skyrocket to over 95%. Yowza.
When things aren’t going according to plan, however, that doesn’t mean the business is doomed. Successful entrepreneurs are visionaries, innovators and problem-solvers capable of developing new approaches. Implementing a pivot, or course change, can save a startup. But when too emotionally involved or blinded by ambition, a pivot can be a further drain on resources.
As the saying goes, “Sometimes the best deal is the one you don’t do.” When is the best time to halt the pivots, bow out gracefully and take the loss?
We don’t have all the answers, but this information could be vital for all entrepreneurs. So, let’s open the discourse on pivoting protocols and potential failures.
You tell us: When is the right time to pivot and stop investing time and money and close shop?
Now we ask our community—should we start a series of stories based on helping entrepreneurs answer the ultimate question: to pivot or not to pivot?
Posted By Adam Fridman