185. Three Questions To Ask Before Shutting Down

VC Minute
My friend Eric is a very successful startup founder who has been a CEO coach for the last decade. When founders come to him to ask if they should shut down their startup, he runs this process with them.

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Eric Marcoullier:

My name is Eric Marcoulier, and for the last several years, I have been exclusively a startup coach. I started technology companies in 1995 when I dropped out of college to move to San Francisco and put a publishing company online, and I never looked back. A lot of people have been asking me, in the last year or so especially, whether or not they should shut down their company. And it’s not an uncommon question that I’ve gotten over the last decade.

They’re typically early-stage founders. If you’re doing 4 million in revenue, you’re probably not asking, should I shut this company down? You’re asking, should I exit or should I find somebody to take over as CEO? But you’re not asking, should I shut it down? Those people typically are solo founders. They’ve been grinding on an idea for a year or two, and they haven’t made meaningful headway, and they’re trying to figure out, are they wrong about the market opportunity, or are they just not far enough along in the process to figure it out.

And every single one of them is haunted by this concern that they’re going to give up a little bit too early and in 6 months or a year, they’re going to see some announcement of some very successful startup doing exactly what it was that they did. They’re like, I just should have just grounded out a little bit longer. And so I always say the exact same thing, which is, go talk to your market and don’t try and sell them. That’s not what this is about.

But you want to go to people that you believe make up the best, right? The ICP, right? The ideal customer profile. The single mom who is working two jobs. Or the tech CTO in finance that has a hundred employees or more. Whatever the hell your market is, you want to go and you want to talk to them and you want to say, “do you have this problem?” And if the answer is “no,” great! Close the business. If the answer is yes, that’s not a good enough reason.

Next question is, “what is the impact of this problem?” And a lot of times, most times, people have never thought in those terms before, right? I have problems every day. I don’t actually think about how it truly affects my business or my life or whatever else I just get aggravated. And so there’s a consultative approach here, which typically looks like asking the question, Hey, if you don’t solve this problem this year, what happens? And if the answer is “not much,” shut down your business, right? It’s not a market worth solving.

But if you can, with some back and forth, figure out that, oh, wow, this is a problem that costs an individual a thousand dollars and there’s a million of them. Or it costs a business $500,000. Okay. That’s pretty good too. Still not enough to keep your business going.

You ask the 3rd question, which is how have you previously tried to solve this problem? And a lot of times, somebody will say, man, I really haven’t. And you go, even like searched for a solution on Google. Have you ever queried the oracle about this? And if they answer, no, doesn’t matter if this is an impactful problem that they have, if they’re not motivated to find a solution, your odds of getting in front of them and motivating them to action are basically zero. Shut down your business.

But if somebody says I have this problem, and they can quantify the impact of their life, you know, it’s emotional. But in B2B, obviously, you’re looking for a financial sort of impact and they can tell you, “man, I tried these two other companies and I quit this one because it didn’t have this feature that I desperately needed. I stopped using this other one because well the UI was just crap.”

Okay, those are things you need to solve for. Or they say, “we tried building a solution for this.” That’s a qualified person and that’s a qualified market. And without a doubt, you need all three of those. Two’s not enough. They got a problem and there’s not much of an impact, but they have tried to solve it, we’re not in the business of solving small problems. We’re in the business of solving meaningful problems.

So as long as you can go out to the market and hear that got a problem, huge impact, and they’ve tried to solve it, it is probably worth going after. But in the absence of those things, go figure out something else, go find a different problem to solve.

About Eric Marcoullier
Eric coaches first- and second-time tech CEOs, keeping their companies alive long enough to get lucky, figure out their business, find product/market fit and replace his ass with someone who knows how to scale companies beyond $5M in ARR. His work primarily involves challenging business assumptions, providing frameworks for new situations and distilling complexity down to basic, actionable ideas. If you’d like to learn more about his coaching, visit www.marcoullier.com or www.linkedin.com/in/bpm140

About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

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