How Do I Know If My Business Has Failed Or If I Should Keep Going?

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1:24ask myself if I'm ever in this situation. And here's the question. If you could take back all the time, all the effort, all the money that you spent on this business that you're questioning, and you can have it all back, would you still keep going? And that tells you a lot, that question. And what you do with that answer is what we're going to be walking through in today's episode. Nicole, of course, is with me again here on Q &A Wednesday. Nicole is the executive producer of the show. She's my co-founder and my wife, of course. Nicole, thanks for being here. I'm always happy to be here. Thank you, Omar.

2:01Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday to help you start, grow, and scale your business. I got a quick favor to ask. If this show has helped you in any way, leave me a quick review. You could do so wherever you listen to podcasts. This helps me and my team reach even more people who need the same no-fluff practical business advice that you're getting from the show. It only takes a few seconds, but it makes a huge difference. Thanks for being a part of our journey to help others on their journey.

2:37I think this question that comes from Michael today takes a lot to say out loud. So thank you, Michael, for sending this one in. Michael asks, how do I know if my business has actually failed or I just need to keep going? I can't tell if I'm being persistent or if I'm being stupid. It was hard to say that last word. And that line really gets me. What do you say to Michael? Yeah, that's exactly the fear. I mean, that's the fear that we all kind of go through at some point in our business. It's like, did I back the wrong horse? Did I make the wrong bet here? And that's OK. I want to say that it's OK to have this experience.

3:14Everybody celebrates the founders and the business owners that have pushed through and persevered and won. But no one really talks about the graveyard of businesses that a lot of people have to have in order to find that winning business, to find the business that wins. And today we're going to talk about how do you actually know if this is one of those businesses that's going to end up in the graveyard and I should just cut my losses and move on with another business? Or this is something here. I have some potential. I should keep going. I should keep persevering. And it's a question of that grit and persistence.

3:49Yes. It's such a fine one. I can't wait to hear how you unpack this one. Yeah. And what I want to give Michael and everybody listening is more than just a feeling, right? A lot of this is just feelings. I feel burnt out. I feel like this is not working. I feel like this may not be the thing. Or I feel like maybe this thing has a chance. I want to give you more than a feeling. We're going to give you some numbers. We're going to give you a strategy. We're going to give you a framework that you can follow so that you're a little bit more objective about this. So I mentioned at the top that, you know, the biggest takeaway is asking yourself the question, hey, if I can get all my money back, all my time back from all the things I've invested in this business that maybe I'm questioning, maybe it's like two years of time and effort and money.

4:27If you can have all back, would you continue the business regardless? Like that's a good framework because a lot of us, we make decisions based on sunk costs. Like let's say there is no sunk costs. Let's say you had everything back and you're back to zero again and nothing was lost. Would you still believe in this business? Would you still want to continue? And this is a reoccurring theme. We're going to be talking about this idea of sunk cost and the sunk cost fallacy. It's like, do I put good money after bad money? And do I like into a business that maybe is not serving me anymore? We're getting into that.

4:59So there are five steps to this strategy to really nail down. Is my business failing or is it, you know, something that I should keep going with and should persevere? So step one is my favorite step. And it's because it's easy and it's that the numbers don't lie. Numbers do not lie. Okay. And this is what I love about business is that there's a lot of objective signals that you can use to make decisions. So I want to start with the trend, not a bad month. You can have a bad month. Maybe your business is seasonal. Maybe sometimes it's down and sometimes it's up and you're expecting it. But I'm talking about a trend, a direction in time.

5:38And the way I want you to kind of look at it is that anything that exceeds three months is really a trend, is really something you need to pay attention to, right? Anything less, it could be an aberration. It could be a bad month. You could have had something going on personally in your life that's affecting the business and its numbers. And when I say numbers, I'm talking about like your revenue, right? The numbers that actually grow the business. So you have some time. There is some grace period here. So if you're just starting out, it's been like a few weeks, that's not enough time. You need a little bit of time to see if there's a trend growing.

6:09There's something happening on a consistent basis. I think trend is the key word here. And I can't remember how it's phrased normally. Like once is, you know, once off, but twice is a pattern. Or you're saying three months at a minimum is a good enough time to see. Yes, to see if this is something consistent, right? Because numbers trending down, numbers trending up. Right. And especially, it depends on the business, of course. But I know in the services, a lot of people, it's a bit of an on-off switch. They spend a lot of time getting business, and then they have to fulfill that business. So those months are kind of slowing down because they're not gaining customers.

6:42So it's a bit of an up and down there. So you have to be mindful of, you've got to be fair. You can't just say, oh, well, I made more money last month than this month, so this must mean my business is doomed to fail. No, you have to give yourself a little bit of leeway to see if this is actually moving in the wrong direction. Now, what if it's beyond three months? Like, I believe that six months and, you know, you're in a really serious territory where you really might have to realize that I don't have a winner here or like it's six months of losses, six months going in the wrong direction. I'm not talking about like one month is up, one month is down.

7:16I'm talking about like you're continuing to make less and less money or having less and less customers. And it's been six months since your best month. It's not so great. So you said this. It's about revenue. We're purely looking at revenue here because it could be leads. It could be the customers you're talking to. It could be prospects. Yeah, I'm talking about money here. I'm talking about revenue and sales cures all things in business. OK, if you have if you're making a good enough revenue, you can make hires. You're not going to get burnt out. You can invest in marketing. You can get more sales and get more salespeople.

7:49You can get an office. You can invest in so many things. Right. But if you don't have revenue, like and business is money, like I know we like to do things because we want to put something in the world. We want to express ourselves and that's all good. And we should have that. But in order for you to stay in business, you need revenue. And if the revenue is not there and it's gone beyond three months, now we're in the six months territory. Something fundamental needs to change. It's not a tweak. It's not a little small. You might have to change direction, pivot, change your audience, change your product, your offer.

8:20you need to start taking this seriously. Now, I have to mention this because some people wait until a year has gone. So if a year has gone and the downward trend, like the chart of your revenue is going down, it's not going up and down. It's not going up, you know, up, up, up, and then a little bit down and up. No, if it's just going down straight like a slope, you're cooked. Okay, I'm sorry, but that's the honest read. And from a revenue standpoint, your business is just not sustainable, right? You're not going to be able to continue to run your business in a profitable way for very much longer.

8:53It's pretty amazing that you're still in business. So a lot of us, we wait too long to take action because we want to hope that things are just going to change. Things are going to just change miraculously and things are going to turn around. This is what I found in 20 years of business. It never just changes. It never just changes on its own. There's something that you do that makes it change. Like when you change something in the business, when you change your audience, when you do a new marketing strategy, when you start posting more on social, when you do something, then something changes either for the good or for the bad, but it doesn't just change on its own.

9:26So even if like the numbers are trending down and you're measuring those, those variables, so you're changing a marketing strategy, you've made a pivot or a change to your product or service, you're monitoring that even with those changes, it's still trending down. That's what you're saying, right? I'm saying that, but I think, I think a lot of people, they don't even get to that point. Like a year has gone by. Things are not looking good. And they're just hoping things are going to just turn around. People are going to learn about their business. People are going to start walking through the door.

9:54That's just not going to happen if you don't change anything. Like you're getting the results right now, given the inputs you're putting in. Right. Given the action you're taking right now in your business, that's the results you're getting. Right. Want different results? Got to do different actions. This is how it works. And it's easy to say this outside looking in. But I've lived it. And I've lived that life where it's just like I'm hoping and wishing. And then I realize I get frustrated and I just do something and then, oh, something happens now. Now I'm getting more business. Funny thing about action.

10:22Right. We've lived this experience and I know we'll touch on it a little bit later on. So we definitely are speaking from experience here as well. Yeah. And I do want to mention that, you know, most people that we serve here on the podcast are small business owners. We're not talking about big corporates, right? Because there's a lot of companies that have funding and that they can have no revenue. They can have a down quarter, six months because they're investing in growth. They're not really worried about making money. But we're not talking about ChatGBT and OpenAI. We're talking about businesses like you and I that are trying to make a healthy living, millions of dollars, but we have to do it sensibly and see what's happening in the marketplace.

11:00Are we making money with what we're offering? So there are small businesses that grow healthy and there are big businesses that are dying. It happens all the time. And this is all to say that really the direction your business is moving and the revenue and your profits is really what matters. That's really what you need to focus on. This is what I mean by the numbers don't lie in step one. Like just trust the numbers. Let the numbers tell you if, hey, this is worth continuing. And I want to also say that like you need to be rewarded somehow. You need to make sure that like, hey, this business is actually serving you.

11:31The whole point of becoming an entrepreneur is that it's a vehicle to have freedom and independence financially. And if it's not doing that for you, then that's not an even exchange. We had Rameed Sadie one time on the podcast recently, and we were in Tokyo, and he said something that really resonated with me as a business owner. He says, every business owner needs to say, what am I getting? Have your hand out, palm out. What am I getting in exchange for all my hard work and sacrifice and money and time and effort? At some point, the business needs to pay you back. Yeah, because it's hard to sit in those downward slogs and those moments for a long time.

12:07It's fine for a short term, a short burst, but you can get through it. But to sit in that for a long time, yeah, it's tough. Yeah, it's not good for the mental health either. No, for sure. I love learning Italian, especially because I like to connect with my in-laws, particularly my mother-in-law, who has us over every week for pasta. And I want to ask for extra helpings in Italian. It's kind of fun. That's why I'm excited to have Rosetta Stone as today's sponsor. Rosetta Stone just came out with Rosetta Stone Sapphire, their biggest launch in over a decade. It uses the research-backed method Rosetta Stone is known for with cutting-edge features that makes it easy to speak confidently about topics you care about.

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15:17That's Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K.com, Upwork.com. So let's move on to step two, which is quitting the business versus quitting a version of the business. Right. I want to share a distinction that has really saved a lot of our businesses. but most businesses I interact with, like I often feel like this distinction is not something that they really focus on. And that is you need sometimes to quit a version of your business, a type of manifestation of this business or a type of the way you're delivering this business and say, hey, this is not a failure by quitting it.

15:58It's me understanding that this is not working. Your job as an entrepreneur is to serve the customer. And if you're not serving the customer, you need to stop doing that, right? Like stop doing things that people don't want. I need to pivot. And that's just an improvement. You're just improving your business in that way. And it's almost worth mentioning this in its own section here, because you could save your business by just not being stubborn, by just pivoting a little bit and realizing that, hey, it's okay for me to let go of this idea and create a different version of this idea. And in tech, we call this killing our darlings.

16:32And I don't know if this is an Australian expression, not throwing the baby out with the bathwater. That's a good one. But what I love about the tech killing our darlings thing is that like, you're going to create things that you love. Like when we had Webinar Ninja with our software company, we created a bunch of features that we absolutely thought were amazing. But at some point we started to look at the data and look if users are actually using these features. Are we actually making any headway? Is it valuable for our customer? If not, we need to remove these features because it's bloating the software.

17:01It's causing more problems because the The more features you have, the more problems you can have, more bugs, the more complicated the software becomes for the user. So sometimes you just got to like say, hey, this is not serving my customer anymore, regardless of how brilliant I think it is. I need to just cut it out. Right. It's getting very analytical and very specific about what elements of the business aren't working. So it's not the whole business is failing. Right. Really getting granular. What is not working that we need to fix? Yeah. And I would say that it's good to use a bit of sports mentality here.

17:32A lot of people know I play basketball, but like sometimes you just have to put your ego aside. It doesn't really matter like what the product does. It doesn't matter how you deliver as long as your customer is happy and is willing to pay. So it doesn't matter how you get to the win in basketball. Sometimes it's like I realize, oh, they're double teaming me. I should not be shooting the ball. I need to pass the ball because somebody's open if I'm double teamed. So like in this instance, like I'm usually valuable by scoring, but right now I'm not supposed to score. I need to pass more. so like you have to adjust and just make sure that you put your customer first that makes sense to me i don't know about the double teaming bit but i'm sure maybe there'll be some basketball fans that understand that analogy exactly a rule in basketball is like if you're double team that means somebody's open that means that that person's not guarding the other person you know the second person that's guarding you anyway we did this ourself with our podcast our first podcast was not this podcast we had a podcast called people who know their it was our first podcast We did interviews with other entrepreneurs and we had to kill that show, kill that darling, even though we put so much time and effort into it and six months and 40 something episodes and hustle to get like people like Gary V on our show.

18:43We had to say, this is not working, you know, and we realized, OK, we're not the best when it comes to interviews. We're not really differentiating ourselves. We used our strengths as teachers and said, Let's teach on this podcast. And that's why the 100-dollar MBA is primarily lesson-based, adding value in some way through answering questions like this. So sometimes, you know, your biggest failures, your biggest, you know, mistakes actually teach you what not to do so that you can create a better product. And I think what I was trying to say before with the baby in the bathwater and what you think what you said in the beginning of a different version, it's we still stayed in the podcasting space.

19:19We still kept with, you know, we believed in the idea of podcasting. It was that particular podcast that wasn't working. And we got, like you said, all those things you mentioned. We weren't leveraging our strengths. All the things that, you know, we've talked about that you've mentioned here. And there's other episodes that we can refer to that go into detail. Those were the things that weren't working when it came to that podcast. It wasn't that podcasting doesn't work. It's not that we can't podcast. Our implementation, yeah. Our implementation of this concept was not working. and we had to really see that distinction.

19:52And, you know, it reminds me of one of my favorite books, The Hard Thing About Hard Things, Ben Horowitz. He talks about, you know, sometimes you've got to create a bad product to create a good one. You know, you have to realize, oh, this is not what people want. I need to create something different. And again, you have to be humble enough to realize that you failed. It's okay. Failure is not the end of the world. You could just bounce back and learn from that failure and go ahead and create something better. And we looked at those numbers. We saw the downward trend. The trend was the downloads weren't going up every episode that we released.

20:23So that was just a very clear indicator that that wasn't working in particular when it came to. I also want to point out that this is an exercise you're going to continue to do even when your business is successful. You're going to continue to reinvent yourself and improve your business, improve your program. Like, for example, the$100 MBA program. We've launched it in 2013, and we continue to improve it until this day. We realize, oh, that's not working anymore. We need to add more templates. We need to add more, you know, examples. We need to maybe create content that doesn't age that quickly.

20:54We also, you know, implemented AI features in there so that people can be able to implement the stuff that we teach in the program. Like big companies do this all the time. They create products that cannibalize their current product lines. Apple does this all the time. You know, before the iPhone, there was the iPod and the iPod video, which basically was like a very, very basic version of an iPhone. It did like one third of what the iPhone does. but the point is is that they realize we need to do this before a competition does this we need to reinvent ourselves and we need to kind of make sure that we're constantly killing our darlings and realize that hey this is not this is good and people are happy with it but they're not gonna be happy with it forever it was clear to us when the podcast wasn't working how does michael know to kill the business completely or kill that version pivot do something different in that business but still stay in that in the business that he's in a good way to answer that question that Mike has is, or Michael to have is, is ask the question, is the problem I have right now, is it a market problem?

21:52Is the market the problem or is it the offer I'm presenting? If nobody wants this solved, like there's no real problem here to be, to be had in the market doesn't want this anymore, right? That's a market problem, right? There's no really problem to solve here, right? That might be the real ending of your business, right? But sometimes you're trying to sell a product or service or solution to the wrong market. And they don't really appreciate what you're offering. They really understand what you're offering. One of the things I always say is that like when you're making any kind of offer or solving any problem, you have to sell it to people that actually recognize they have that problem.

22:30Maybe if you are selling, you know, let's say healthy recipes so you can cook healthy dinners and you're selling to people, they're not really health conscious, right? They're like, that sounds good and all. I know should be doing that, but you know what? I'm busy. I'm just going to pick up Chipotle, right? That's just the reality. You're selling it to the wrong market. But if you sell it to people that are like fitness fanatics, people that really care about their health, people that are biohacking, they're going to be like, yeah, I need to know how to do that. And that is the right market for that.

22:56That makes sense. And then it could be your offer. And these are the two things you need to look at. Sometimes we try to sell something and it doesn't really solve the whole problem, right? It solves a portion of the problem, but they're like, hey, I still have to do X, Y, Z. You know, if we go back to the healthy food type of thing, like I need to cook healthy meals? Can you give me some recipes? Maybe that's not enough. Maybe your offer needs to include also a shopping list so they know what to buy when they go to the grocery store. Maybe they need to be specific for your local area of like, maybe you can just do like an Uber Eats cart and share that cart with them.

23:27Like here, order this every week, make it super simple. So like your offer really needs to solve the whole problem so that they don't kind of feel like, oh, I still need help or this is actually worth paying you money for. Can you give me another example? Because I I think there's more to unpack there. Okay, great. As you know, we have run events, many events here in our company. One event that we ran several times is called OzCon, which is a retreat for entrepreneurs. And we go on these skiing trips. Last time we went to Queenstown and we spent five days in the snow and it was all inclusive and great restaurants and great crowd of entrepreneurs, right?