End of the Line

By Richard Berman

end-of-the-linePart of being involved with a start-up company is balancing the mix of risk and reward. That’s why people who found their own technology companies work 120 hours a week while sleeping in their offices/bedrooms/kitchens to try to “make it.” Unfortunately, the odds are stacked against new companies, and most start-ups (90% according to Mashable) will eventually go under.

Closing up shop may sound like a fairly simple process, but how companies shut down is often a reflection of their founders’ personalities. Over the last 15 years VerbFactory has seen a lot of businesses come and go, and how entrepreneurs handle the end is often a predictor of whether they’ll land on their feet. Here are a few things that we’ve noticed, and some advice on how to make the process as smooth as possible:

  • Emotional Ties. Most new companies reflect their founders’ passion, but when it comes time to wind operations down, it can be difficult for the founder and his or her team to put their emotions aside and unwind the company in a reasonable way. It is often said that the last few interactions with a person or business will be what others remember. Failure is easy to forgive, but dishonesty and bitterness are not. That’s why it’s important to maintain one’s values even if a business is not going to succeed.
  • Denial. There is an incredible temptation to bail out the water as more comes rushing in, but many founders simply cannot accept that their business isn’t going to make it. They often think that if they can just land one huge customer or partner, everything will change. Perseverance is an admirable virtue, but hanging on too long can lead to burned bridges and damaged credit. Even if one doesn’t want to accept the inevitable, founders have a fiduciary responsibility to consider, especially if they want to start other businesses. Having a good sense of reality is important when the bad days come.
  • Speed. Winding down a failed start-up can be downright depressing, which can lead to apathy and inaction. There will be time for a post-mortem later on, but it’s important to first take care of whatever business remains. Ending a venture doesn’t need to be a long process, and founders should work with a lawyer to set up the fastest exit timetable possible.

If you are an entrepreneur who has gone through this process, you have heard all the cliches about failure – and some of them are even true. Nevertheless, it may take you a while to process the experience and get back in the game. Once you’ve settled up and done what you can to keep your relationships intact, take as much time for yourself as you can afford. Rediscover the satisfaction of an eight-hour sleep and a social life. You’ve earned that much.

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