One thing I’ve learned about the entrepreneurial spirit is that it leads to failure. With figures as high as 90% of businesses fail, this is something you have to get used to. Even leaders like Robert Kiyosaki mention that knowledge is what makes money - and that knowledge is gained by failure. You’ve heard the sayings before, learn from your failures…
But I want to take it one step further:
Learn when to cut your losses
There comes a time when you’re looking at your idea or your business, and you have to be honest. Will this business continue to succeed? Is all this effort I’m putting into it worth it? This is the time when you have to consider whether this will be one of the 90% of your failed business ventures. Let me tell you this: If you have to question it, it probably is.
I’ve been a cut loss
In my most recent job experience, the owner of the company said “You know what, this isn’t going to work.” It was no reflection on my work, just him realizing that this particular venture was not going to be successful. Instead of continuing a losing battle, he axed it right there. Now, some would argue that he already invested 100’s of thousands of dollars in - and should try to continue and work it into something successful. However, he was honest - and a true entrepreneur. He knew that this venture wasn’t going to be something that he could turn around - so he cut his losses - and fast. Now, instead of many more months of headaches with a 10% chance of coming out ahead, he can cut his losses now, and move on to the next new idea.
At first I was a bit bitter - but this realization came later: It’s not shameful to cut your losses. All the worthwhile businesses do this. How many times did you hear about companies like AOL buying and selling portions of their business. They have sold them at a loss sometimes, but that made the most business and fiscal sense. It’s not shameful - its good business.
It can be difficult when cutting losses effects people. However, think about it this way: would you rather dig a deeper hole and put them even further down in it with you - or admit there is a hole and give them just enough chance to be able to jump back out of it. This is a case when making a smart business decision is just and fair, even though our emotions may try to make us think that it isn’t.
I’ve cut my losses
The most notable one I can think of was JEMGames. I bought this package for game hosting. It included some pre-made PHP code, 1000 flash games, and a gaming system for keeping high scores. I created this site and promoted the crap out of it. However, this was a system that many others in the market had - so there was very high competition. In the end, I found that I was not getting even remotely enough traffic to justify hosting costs. I terminated the project and archived the games.
A few days ago, I revisited some of my archived projects. I saw the 1000 flash games from JEMGames. I was faced with a choice - continue to store them and possibly re-try this idea later - or just delete them and call it a loss. It was hard to do because I knew I had paid money for this bundle. In the end, I just deleted the content of this site. I knew that I really wasn’t going to be fully excited to give it a go again, so I decided to cut my losses. I learned a lot from that venture and I consider that knowledge where the money was spent.
Cut your losses now
Look at any failing ideas you have and cut them. Stop wasting your time on something that is not working. Trust me, you’ll come up with another idea. Ideas are easy. Now, don’t confuse this in such a way that I sound like I’m asking you to give up everything in your life that isn’t immediately successful - not at all. But, deep down, there are some nagging projects and ideas that maybe aren’t going to turn around - and you know this. Relieve this stress from your life - cut them out - and move on to the next idea. Trust me, it will feel great.
Have you cut anything out of your life lately and want to tell me about it? Add a comment to share your story!