How to Shut Down Your Struggling Startup
A failed business venture is practically a rite of passage. But rather than simply imploding, bowing out with gratitude and grace can help set the stage for future success.
Opinions expressed by Entrepreneur contributors are their own.
In life, people remember how things ended. A couple may be fuzzy about the details of their courtship, for instance, but the particulars of a divorce are always starkly vivid.
As such, if the sun is setting on your startup, it's important to craft a final impression that leaves everyone with positive thoughts about you and your company.
Unfortunately, this is usually happening while the company is in full-on disaster mode: you're stressed out, your relationships are fraying and your resolve is destroyed. Nevertheless, you must take action in order to end the turbulence with as much poise as possible. You can't change the past, but you can certainly determine how you are remembered.
Rip the Band-Aid off. Nothing gets better with time when you're talking about a failing startup. It's like pulling a Band-Aid off--the slower you act, the more painful it feels. Every day that goes by erodes your finances, your relationships and your sanity. The sooner you can wind down, the sooner you can go on to focus on something positive.
If things didn't work out, that's okay. Startups fail all the time, and there will always be another chance.
Take ownership. The best way to face a failing venture is to take full ownership of the outcome. No one wants to hear a story of victimhood or that the problem was someone else's fault. The more you can take ownership and humanize the failure, the better reception you'll likely get.
One technique I've found personally useful--and even cathartic--is to write a letter to myself explaining, in detail, why things didn't work out. Once the thoughts were out of my head and onto the page, I had the perspective to then reference the letter when talking about the business to people later on.
Give your team a clear answer. Telling your team that it's game over is gut-wrenching. But what you want to avoid is providing a vague, non-specific reason for the shutdown. Be as clear as possible about what happened, where things stand and how this will affect them. If they can't articulate what happened to others, you didn't do a great job articulating it to them.
If possible, offer people any help that you can. That might mean opening up your network to help them find a job, or at least providing a glowing reference.
Related: Closing Shop: Why I Decided to Throw in the Towel
Thank your customers. Your team and investors may represent dozens of relationships, but your customers likely represent hundreds or even thousands--many of which you didn't even realize you had. These are the people that will likely support you in the future, so letting them know how much you appreciate them is key.
If possible, offer a final gift that's as personal as possible. Maybe you're closing down your restaurant. Offer to cook the final meal yourself using your favorite recipe. People will remember the offer--even if they never take you up on it.
Level with your investors. What you may find surprising about telling your investors that they lost all of their money is that they already know. Give your investors credit; they're smart. Explain to them what you set out to do, what assumptions failed and why. You don't need to apologize, you need to explain.
And appreciation for their support is just as important as a cogent explanation. Investors love to back entrepreneurs that they know and love, even if things didn't necessarily go according to plan during a previous collaboration.
Thank your friends and family. Throughout the journey of building a business, the excitement and resulting strain that you've gone through is reflected in all of your personal relationships.
Not only do those close to you deserve appreciation for their support, they also deserve to know that you're okay. They have probably watched your mood change and are rightfully concerned. They'll want to know that this is behind you and that it's okay to talk about what happened.
Reset and reload. Much like a marathon runner needs to cool down, having to pull the plug on a startup entitles you to take a break too. If you're too broke to rest, take a job that requires as little thought as possible to keep the bills paid while you take the time to clear your head.
And when the dust settles, the best way to put the past behind you is to focus on the future. Put all of that nervous energy into building something great and making use of what you learned.
There is always a next time.