How Do I Know If My Business Has Failed Or If I Should Keep Going?
The $100 MBA Show - Omar Zenhom
Omar Zenhom addresses a common entrepreneurial dilemma: determining whether a struggling business has failed or if persistence is still warr
Key takeaways
- The most critical question to ask is: If you could recover all your time, money, and effort, would you still start this business? This helps overcome emotional attachment to sunk costs.
- Revenue trends over at least three months are more reliable than short-term fluctuations; a consistent downward trend beyond six months signals serious issues.
Main topics
- Assessing business viability
- Sunk cost fallacy
Notable quotes
If you could take back all the time, all the effort, all the money that you spent on this business... would you still keep going?
Numbers do not lie.
Conclusion
Entrepreneurs should rely on objective metrics like sustained revenue trends rather than
Transcript preview
Speaker 1 (0:00) How do I know if my business has failed or if I should keep going? That's today's question here on Q &A Wednesday. And to be honest, it's one of the heaviest ideas, questions that entrepreneurs have to ask themselves more often than they like to ask themselves, because it means that things are not going so great. And I want to give today's kind of. takeaway right from the top. And we're going to talk about how to implement this takeaway. But there's one question that I like to ask myself if I'm ever in this situation. And here's the question. If you could take back all the time, all the effort, all the money that you spent on this business that you're questioning, and you can have it all back, would you still keep going? And that tells you a lot, that question. What you do with that answer is what we're going to be walking through in today's episode. Nicole, of course, is with me again here on Q &A Wednesday. Nicole is the executive producer of the show. She's my co-founder and my wife, of course. Nicole, thanks for being here. Speaker 2 (0:55) I'm always happy to be here. Thank you, Omar. Speaker 1 (1:03) Welcome back to the $100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday to help you start, grow, and scale your business. Speaker 1 (1:16) I got a quick favor to ask. If this show has helped you in any way, leave me a quick review. You could do so wherever you listen to podcasts. This helps me and my team reach even more people who need the same no-fluff practical business advice that you're getting from this show. It only takes a few seconds, but it makes a huge difference. Thanks for being a part of our journey to help others on their journey. Speaker 2 (1:40) I think this question that comes from Michael today takes a lot to say out loud. So thank you, Michael, for sending this one in. Michael asks, how do I know if my business has actually failed or I just need to keep going? I can't tell if I'm being persistent or if I'm being... stupid. It was hard to say that last word. And that line really gets me. What do you say to Michael? Speaker 1 (2:02) Yeah, that's exactly the fear. I mean, that's the fear that we all kind of go through at some point in our business. It's like, did I back the wrong horse? Did I make the wrong bet here? And that's okay. I want to say that it's okay to have this experience. Everybody celebrates the founders and the business owners that have pushed through and persevered and won. But no one really talks about the graveyard of businesses that a lot of people have to have in order to find that winning business, to find the business that wins. And today we're going to talk about how do you actually know if this is one of those businesses that's going to end up in the graveyard, and I should just cut my losses and move on with another business, or this is something here. I have some potential. I should keep going. I should keep persevering. And Speaker 2 (2:48) it's a question of that. grit and persistence. Yes. It's such a fine one. I can't wait to hear how you unpack this one. Speaker 1 (2:55) Yeah. And what I want to give Michael and everybody listening is more than just a feeling, right? A lot of this is just feelings. I feel burnt out. I feel like this is not working. I feel like this may not be the thing, or I feel like maybe this thing has a chance. Speaker 2 (3:07) I want to Speaker 1 (3:08) give you more than a feeling. We're going to give you some numbers. We're going to give you a strategy. We're going to give you a framework that you can follow so that you're a little bit more objective about this. So I mentioned at the top that, you know, the biggest takeaway is asking yourself the question, hey, if I can get all my money back, all my time back from all the things I've invested in this business that maybe I'm questioning, maybe it's like two years of time and effort and money. If you can have all back, would you continue the business regardless? Like that's a good framework because a lot of us, we make decisions based on sunk costs. Like let's say there is no sunk costs. Let's say you had everything back and you're back to zero again and nothing was lost. Would you still believe in this business? Would you still want to continue? And this is a reoccurring theme. We're going to be talking about this idea of sunk costs and the sunk cost fallacy. It's like, do I put good money after bad money? And do I like into a business that maybe is not serving me anymore? We're getting into that. So there are five steps to this strategy to really nail down is my business failing or is it, you know, something that I should keep going with and should persevere. So step one is my favorite step. And it's because it's easy and it's that the numbers don't lie. Numbers do not lie. Okay. And this is what I love about business is that there's a lot of objective signals that you can use to make decisions. I want to start with the trend, not a bad month. You could have a bad month. Maybe your business is seasonal. Maybe sometimes it's down and sometimes it's up and you're expecting it. But I'm talking about a trend, a direction in time. And the way I want you to kind of look at it is that anything that exceeds three months is really a trend, is really something you need to pay attention to, right? Anything less. It could be an aberration. It could be a bad month. You could have had something going on personally in your life that's affecting the business and its numbers. And when I say numbers, I'm talking about like your revenue, right? The numbers that actually grow the business. So you have some time. There is some grace period here. So if you're just starting out, it's been like a few weeks. That's not enough time. You need a little bit of time to see if there's a trend growing. There's something happening on a consistent basis. I Speaker 2 (5:14) think trend is the key word here. I can't remember how it's phrased normally. Like once is, you know, once off, but twice is a pattern. Or you're saying three months at a minimum is a good enough time to see. To see if this is something Speaker 1 (5:27) consistent, right? Because Speaker 2 (5:28) numbers trending down, numbers trending up. Right. Speaker 1 (5:31) And especially it depends on the business, of course. Like, but I know in the services, a lot of people, it's a bit of an on off switch. They spend a lot of time getting business and then they have to fulfill that business. So those months are kind of slowing down because they're not. gaining customers. So it's a bit of an up and down there. So like, you have to be mindful of like, you gotta be fair. You can't just like say, oh, well, I made more money last month than this month. So this must mean my business is doomed to fail. No, you have to give yourself a little bit of leeway to see if this is actually moving in the wrong direction. Now, what if it's beyond three months? Like I believe that six months and you know, you're in a really serious territory where you really might have to realize that I don't have a winner here. where like it's six months of losses, six months going in the wrong direction. I'm not talking about like one month is up, one month is down. I'm talking about like you're continuing to make less and less money or having less and less customers. And it's been six months since your best month. It's not so great. Speaker 2 (6:27) So you said this, it's about revenue. We're purely looking at revenue here because it could be leads. It could be the customers you're talking to. It could be prospects. Yeah, Speaker 1 (6:38) I'm talking about money here. I'm talking about revenue and sales cures all things in business. If you're making good enough revenue, you can make hires. You're not going to get burnt out. You can invest in marketing. You can get more sales and get more salespeople. You can get an office. You can invest in so many things. But if you don't have revenue and business is money, I know we like to do things because we want to... Put something in the world. We want to express ourselves and that's all good. And we should have that. But in order for you to stay in business, you need revenue. And if the revenue is not there and it's gone beyond three months, now we're in the six months territory. Something fundamental needs to change. It's not a tweak. It's not a little small. You might have to change direction, pivot, change your audience, change your product, your offer. You need to start taking this seriously. Now, I have to mention this because some people wait until. a year has gone. So if a year has gone and the downward trend, like the chart of your revenue is going down, it's not going up and down. It's not going up, you know, up, up, up, and then a little bit down and up. No, if it's just going down straight like a slope, you're cooked. Okay. I'm sorry, but that's the honest read. And from a revenue standpoint, your business is just not sustainable, right? You're not going to be able to continue to run your business in a profitable way. for very much longer. It's pretty amazing that you're still in business. So a lot of us, we wait too long to take action because we want to hope that things are just going to change. Things are going to just change miraculously and things are going to turn around. This is what I found in 20 years of business. It never just changes. It never just changes on its own. There's something that you do that makes it change. Like when you change something in the business, when you change your audience, when you do a new marketing strategy, when you start posting more on social, when you do something, then something changes either for the good or for the bad. But it doesn't just change on its own. So Speaker 2 (8:28) even if like the numbers are trending down and you're measuring those variables, so you're changing a marketing strategy, you've made a pivot or a change to your product or service, you're monitoring that even with those changes. It's still trending down. That's Speaker 1 (8:44) what Speaker 2 (8:44) you're saying, right? I'm Speaker 1 (8:45) saying that, but I think a lot of people, they don't even get to that point. Like a year has gone by, things are not looking good and they're just hoping things are gonna just turn around. People are gonna learn about their business. So people are gonna start walking through the door. That's just not gonna happen if you don't change anything. Like you're getting the results right now given the inputs you're putting in, right? Given the action you're taking right now in your business, that's the results you're getting, right? You want different results, you gotta do different actions. This is how it works. And it's easy to say this. outside looking in, but I've lived it. And I've lived that life where it's just like, I'm hoping and wishing. And then I realized I get frustrated and I just do something and then, oh, something happens now. Now I'm getting more business. Funny thing about action. Speaker 2 (9:24) Right. We've lived this experience and I know we'll touch on it a little bit later on. So we definitely are speaking from experience here as well. Speaker 1 (9:31) Yeah. And I do want to mention that, you know, most people that we serve here on the podcast are small business owners. We're not talking about big corporates, right? Because there's a lot of companies that have funding and that they can have no revenue. They can have a down quarter, six months because they're investing in growth. They're not really worried about making money. But we're not talking about chat, GBT and open AI. We're talking about businesses like you and I that are trying to make a healthy living, millions of dollars. But we have to do it sensibly and see what's happening in the marketplace. Are we making money with what we're offering? So there are. small businesses that grow healthy and there are big businesses that are dying. It happens all the time. And this is all to say that really the direction your business is moving and the revenue and your profits is really what matters. That's really what you need to focus on. This is what I mean by the numbers don't lie in step one. Like just trust the numbers. Let the numbers tell you if, hey, this is worth continuing. Speaker 2 (10:26) And Speaker 1 (10:26) I want to also say that like you need to be rewarded somehow. You need to make sure that like, hey, this business is actually serving you. The whole point of becoming an entrepreneur is that it's a vehicle