How Would You Deal With A Failing Startup
Running a startup is never easy, and there are times when you might need to make a tough call – whether to declare your startup a failure or reflect back and ponder over the issue. Looking ahead is very important in such a case, as looking back would demoralize you from dealing with a failing startup.
Failures are but pillars of success, they say. However handling a failure goes a long way into making the proverb for what it stands. Failures can be dealt with grace, so that you spare consideration for all the stakeholders. A failing startup can also be dealt with so poorly that you would find it very difficult to raise money if you think of going into a new venture.
Here are some points which we would like to put in front of you, so that you know how to perfectly deal with your failing startup.
Consult with investors, shareholders and board members
Your investors, shareholders and board members are an integral part of your startup, and you should consult with them before coming to any such decision. While your failing startup might be disappointing for them at first, they would surely be wise enough to reason your words and help you deal with it correctly. Consulting with them and then putting their words into actions would go down as loyalty, even when your startup or product didn’t work out.
Don’t drag the media in between
Until and unless you and your stakeholders, investors and board members come to a proper plan of unwinding the startup, don’t make the mistake of dragging in the media, the social one as well. You first need to make sure that the PR strategy is proper, since admitting to the media that the startup has failed is never a pretty or rather a petty task.
Keeping a perspective during process
If you go through the records, you would find that the majority of venture backed processes fail. Admitting the same in front of your investors might not be as pretty, although they must have gone through this previously. Being polite is the best way to deal with such problems – be appreciative of their help be graceful and the chances are they would want to work with you again in your new venture.
Ignore temporary solutions
You might get tempted to believe that an upcoming business deal would see off all the problems that are currently taking place. While that may be the case, you just need to make sure whether monetary help would be a permanent fix to your failing startup or not. If not, it’s better to save the money and use it to effectively wind down your startup. Spending money on a lost cause can never provide you gains.
As soon as you are sure that you face a failing startup, you shouldn’t spend money on temporary fixes. Reduce the headcount and cut out the expenses as quickly as you can so that you save some money that would allow you to think differently after successfully winding down the startup.
Be smart about the cash you saved
Think ahead, and calculate the amount of debt that you need to repay. Try saving money that would at least clear all your debts, because asking for money from your investors when your startup is shutting down may not be pleasant. Moreover, the creditors would go after your investors in case of any shortage, and that might not go down well as far as your relationship with the investors is concerned.
Plan your messaging properly
When you think of winding down your failing startup, you need to make sure that you return the money to the investors. You could do that by selling the products at discounted rates. Messaging mismanagement can cause a great deal of harm, since your sales would definitely take a steep downward plunge once you publicly announce that you are winding down the startup. What you need to do is plan strategically, and don’t shut down the functionality immediately. Fire sales would generate some amount of cash, and that would definitely help you.
Entrepreneurs dream of making their startups successful, and obviously no sane man would want to fail in his venture. However, this is reality and failures are a part of the game. Hoping for the best is always advisable, but it should be coupled with planning for the worst, since in this competitive market, it is imperative to plan ahead in case you are dealing with a failing startup.