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Exit with Grace: #5 Things Indian Entrepreneurs Should Do Before They Shut Shop The Stayzilla episode has sent shivers across the Indian ecosystem. It has also made it evident that entrepreneurs must be prepared for failure and should know how to exit abiding by all the compliance.

By Sneha Banerjee

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.


Failure is unavoidable at certain stages of one's life--be it professional or personal. However, the key takeaway from a failure is how well the person dealt with the situation and what the key learnings from the episode were.

Starting one's own venture is an enthralling experience, some start early and few save up from their professional journey and then kick start their venture a little later in life. Failure of a venture can be due to several consequences; lack of funding, dearth of product innovation, unable to match market competition or larger economic issues. In all these cases, the failure of a venture can be a miserable experience for everyone associated in starting up the company.

The Stayzilla episode sent shivers across the Indian ecosystem. It has also made it evident that entrepreneurs must be prepared for failure and should know how to exit the game in a dignified manner.

A company does not shut down overnight. The tremors and cracks appear much ahead in time and it's the responsibility of the core team to ensure that the pre-requisites are taken care of.

#1 Ensure vendor dues are sorted

Your vendors are the ones who anchored your startup's operations. If you've made the most out of them during sunny days, you need to keep be fair to them when you see the storm coming.

"You have a host of stakeholders who need to be kept in the loop - equity holders, investors, employees, financial institutions who are in the fray. They will ensure that liabilities such as PPF, employee dues and financial debt are taken care of. Follow this up with the termination of services and contracts, vacating the office and returning dues to all stakeholders. Have a strong communication and be very frank both ways; your team should be able to trust you," Dr. Som Singh, Founder of Unspun Consulting said.

An entrepreneur should also make sure that he clears his outstanding bills and payments such as rents, water and electricity bills and other amenities.

#2 Your employees have the right to know

An entrepreneur's core strength is his team. Within a smaller setup they tend to become more than just employees to the startup and work as potential entrepreneurs themselves. Hence, your employee has every right to know about the performance of the company.

Inform employees about the shutting of the business and the reason, which they will appreciate. As far as possible clear the dues or give timeline for the same, Anil Joshi - Managing Partner at Unicorn India Ventures.

It's very important for an entrepreneur to be transparent to his employees. If he foresees a closure or the need to axe his staff strength, then he needs to discuss the same with his employees so that they are mentally prepared to face the situation. It also gives employees time to mentally decide what they need to going forward with their careers. An entrepreneur could also use own sources to help his employees get employed elsewhere.

"This is the hardest part. Own up to your mistakes, let them know that they were doing their job well but things didn't pan out as planned and more importantly see if you can do anything in your personal capacity to help them find other jobs. It would also be a great idea to declare upfront what their severance package would be; and settle it as soon as possible," Sudeep Anandapuram of Zippserv said.

#3 Talk to your investors

Investors bet on your idea and at times they provide more than just money in the form of mentorship. It's very important that they know when an entrepreneur is going through times and when they realize that it's time to wind up. Investors may also help the entrepreneur rework strategies and help them close shop meticulously.

It helps if you have fewer investors who have made larger investments rather than having several investors who have made smaller investments for an ease of communication, Anandapuram said.

#4 Customers have the right to know

Whether you run a B2B or a B2C venture, customers need to know when you reach the end of the tunnel. In both cases, make sure you complete your existing commitments and don't take up new orders until you have a clear picture of what lies ahead.

#5 Last but not the least, keep legal help ready

Though startups have a smaller set up, legal advice always comes handy to wind down operations with complete compliance and due diligence.

Rolling the shutters down for his venture is the toughest part for an entrepreneur. But industry experts and ecosystem outsiders believe that a clean and hassle free shut down cements the credibility of an entrepreneur in the industry.This will ensure that once he gets his mojo back, he can easily start working on a new venture or get employed at another organization.

Sneha Banerjee

Entrepreneur Staff

Former Staff, Entrepreneur India

She used to write for Entrepreneur India from Bangalore and other cities in South India. 

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