(By Bruna Martinuzzi)
“Words are powerful. They not only describe an event, they also trigger an emotion. When you re-frame your internal dialogue about the turmoil involved with a company in its final stages, you have an opportunity to tone down the emotion. “Destroy” is very different from “closing down.” Change the narrative in your head so you can approach the facts in a less emotional frame of mind. Be proud that you had the courage and insight to build something in the first place.“
“Success,” says Andy Grove, CEO of Intel, “breeds complacency. Complacency breeds failure. Only the paranoid survive.”
About half of all new small businesses don’t survive over five years. There’s no doubt that vigilance is key.
But no matter how vigilant you are, there are times when failure is inevitable. As a small-business owner, you need to be able to ask yourself some tough questions and take some difficult steps before circumstances catapult you into action when it’s too late.
Rosabeth Moss Kanter, a Harvard Business School professor, puts it best in Why CEOs Should Destroy Their Own Businesses. One question she asks CEOs is, “What’s going to destroy your business, and are you taking steps to do it yourself before others do it to you?”
Major reasons for small-business failures include insufficient capital, competition and low sales. Often, the red flags are there, but many entrepreneurs are colorblind when it comes to their companies and fail to see the warning signs.
Exit Your Business the Smart Way
Here are some thoughts on dismantling your company, when there’s no other choice, before it dismantles you:
1. Manage your emotions. Many issues related to closing down a company you built from scratch are emotional. You’ve invested your time, energy, passion and soul to make it work. You’re asked to destroy what you built. That’s not an easy undertaking.
However, remind yourself of this key fact: Failure as an entrepreneur is nothing to be ashamed of. Many successful entrepreneurs have not one but several failures in their journey. It comes with the territory when you embark on uncharted terrain. If everyone who’s afraid of failure never started a company, where would we be? Where would our country be?
“Our greatest glory,” said Ralph Waldo Emerson, “is not in never failing but in rising up every time we fail.” That’s the American spirit.
2. Re-frame how you label the experience. Words are powerful. They not only describe an event, they also trigger an emotion. When you re-frame your internal dialogue about the turmoil involved with a company in its final stages, you have an opportunity to tone down the emotion. “Destroy” is very different from “closing down.” Change the narrative in your head so you can approach the facts in a less emotional frame of mind. Be proud that you had the courage and insight to build something in the first place.
3. Capture the lesson. Let’s face it: Just because you close down one venture doesn’t mean you won’t start another. History is replete with stories of entrepreneurs who failed and started again. Contemporary examples include Kathryn Minshew, CEO of The Muse; Ben Huh, founder of Cheezburger; and Rob Kramer, CEO of HipSwap Fashion.
Entrepreneurship is in your blood—it’s who you are. So sit down and tally up the business insights you derived from the experience. What are the lessons you learned that you can apply to make your next go around more successful?
4. Cut your losses. Sometimes the hemorrhage from an inevitable closure can be stemmed by taking swift action to cut some losses before it’s too late. For example, as the owner of a small company, let’s say you decide to acquire another small company to bolster your weaknesses. But you later find that the acquisition was ill-fated, as the premises on which the acquisition was based aren’t there. Instead, you’re faced with inferior technology, no sales in the pipeline and no talent worth keeping. Once you realize that your due diligence wasn’t strong enough, that you made a bad decision, have the courage to cut the limb before the bleeding becomes fatal. Decisiveness in the face of the inevitable is a key requirement for any entrepreneur or CEO.
5. Fire yourself. It’s a known fact that the skills required to start a company are different from the skills needed later in the business’s growth phase. Smart entrepreneurs recognize this crucial fact in time and take steps to surround themselves with the right talent to bolster any gaps in their abilities and skills, so they can take the company to the next level. They also heed the signs that tell them they’re no longer the right person to lead at the top. Don’t let your ego act as blinders to the reality facing you. Have the courage to know when to seek your replacement and step aside graciously before it’s too late.
6. Do the right thing. Rather than avoid dealing with the closure until it’s inevitable and risk hurting yourself and the other stakeholders, think about how you can do it properly. Do whatever you can to minimize any damage and avoid burning bridges. How you wind down your company could make a difference on whether or not others want to deal with you in the future.
The SBA provides a comprehensive set of resources to help you exit your company the smart way, whether it’s because of a forced company closure, a retirement or handing the business over to a relative.
Above all, exiting your business is about your character. How people behave in times of difficulty is a true measure of who they are. So take the high road as you go about the business of devolution. When all is said and done, what will people say about how you behaved and how you treated people? That’s the one thing that is totally under your control.