Mods Custom

Author: Ricardo Grant

Without a doubt, failure is a ghost that haunts entrepreneurs . And it is that after months of work and commitment dedicated to an idea, the possibility of not hitting the right business can be unbearable. However, just before starting, the coin is in the air and anything can happen.

If you have the idea, the business plan, experience in the industry in which you will compete, market studies that support your product or service and even potential investors, but the elements do not seem to play in your favor, then you may need to say goodbye to the company. original idea.

But how do you know when it’s time to say “goodbye” to your newly created business? Martin Zwilling , an expert startup mentor and angel investor, says there are several signs that the entrepreneur must detect to change course.

  1. Without a plan there is no opportunity

You may have the most innovative idea in the industry, the best product to market and an enviable portfolio of prospects, but if your goals are not clear, how and where will you lead the company? Lacking a business plan transmits negative messages, such as lack of professionalism and low confidence .

  1. Only you believe that

You assure that your idea is perfect because it meets your needs and aspirations; But just because it’s great for you doesn’t mean it’s great for the target market. Before undertaking (and getting into debt), do market research and analyze your direct competitors well, only then will you know that you are on the right track .

  1. Too much competition

Do you know exactly how many direct competitors you will have in the area where you will operate? If there are too many competing in the same territory, chances are that your opportunities to stand out are limited . A good exercise is to Google which companies offer the same as you, and if there are more than 10, run!

  1. What are you doing there?

The mistake that entrepreneurs usually make is starting their business in an industry with which they have never had a relationship . This, in the medium term, results in a series of bad practices such as bad negotiations with suppliers, hiring of unskilled personnel and dissatisfied clients. Value your experience and undertake in familiar terrain.

Before making the decision to abandon the original business idea, you will need to analyze some factors . Stephen Key , also an entrepreneur mentor, recommends answering the following questions:

  • Have you already used up all your resources and still have not achieved a purchase order?
  • Have you exposed your model to various investors, taken their advice and put it into operation?
  • Have you already approached the right prospects?
  • Are you completely sure that the marketing channels you chose are the correct ones for your product or service?

Be humble, accept your mistakes and design a strategy that helps you get out of the original idea and start another in a safe and more prepared way.

Organizations specializing in entrepreneurship, such as the Center for Business Innovation and Finance from the ITESM and the network of incubators of the National Polytechnic Institute (IPN) , indicate that the primary source of funding for entrepreneurs is called FFF (Friends, Family and Fools) , This is because for someone who is just starting operations, it is difficult to get capital.

If you are about to join the world of entrepreneurs and your family and friends will accompany you on the adventure as investors, take note of these recommendations with which you will avoid conflicts, misunderstandings and, above all, you will keep your good relationship intact .

  • There are no games between investors

Forget about kinship and years of friendship and be a professional . To do this, you will have to develop a business plan that is clear and transparent enough so that your investors know exactly how their money will be invested, what are the growth expectations and in what time each goal will be reached . Remember that they are believing in you and your project.

  • Long friendships clear accounts

Don’t assume that everyone will remember when they will receive their earnings or invested capital. For this reason, it is recommended that everything be in writing – amounts contributed, percentage of profits and ROI -, because this way everyone will be aware of the conditions and response times . In addition, this will force you to commit and work in order to return the capital on the indicated date.

  • Neither good nor bad

The fact that your family or friends are your investors does not mean that you or your business are obliged to operate as they want. Along with the business plan , it draws up a section in which both the rights and obligations of both parties appear , it also includes the conditions and terms in which an investor can withdraw their capital.

  • All or nothing

Before embarking, the balance is in the middle and just as you can succeed, you should also consider the possibility of failure. In that sense, it is recommended that together they reach an agreement on what they will do in case the business does not work out : Will you return the capital with an extra penalty? Will they only accept the investment or will they forgive your debt?

  • New communication codes

In this agreement you are the one who knows about business; therefore, you should always be open to answering questions and listening to your investors . Plan quarterly meetings to update them on how the company is going, if there are problems make no secret of it and celebrate when there is profit. Finally, Randy Myers, editor of CFO magazine , recommends not bringing work problems to family or friends gatherings.

As you will see, asking for support from family or friends is not forbidden, nor does it have to become the prelude to an endless war; on the contrary, with clarity, honesty and everything in writing, it can be an excellent means of financing.