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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

How Do I Get Out of This Business?

Written By: Carol Roth | Comments Off on How Do I Get Out of This Business?
What to do when you when you realize you should have never started your business in the first place…

You had a great idea.  You went through lots of research and work to make it a reality.  You got it started or opened.  Now you are tired.

You forgot that the real work starts after the business is started.  You don’t have enough customers. You don’t have enough money for marketing.  You hate book keeping.  Or maybe you realized that the opportunity isn’t large enough to create a reward for you big enough to justify all of the risk you have taken on.  Now what?!

We have to ask three questions: should you get out, and if yes, when should you get out and how should you get out of your business?

Should You Get Out?  In general, if you believe an investment isn’t going to make a good return for you, there is little reason to keep it.  But many people do just that for emotional reasons once they are already invested.  You need to figure out how much you can make elsewhere (like from a salaried job) plus any additional money you would need to put into the business to keep it afloat and compare that to what you may lose walking away from your investment in the business.  Think of it like a stock that is decreasing in value.  Some people keep throwing money into a sinking stock because they are already invested in it and can’t bear the thought of losing money in the stock, not realizing that if they sold the loser stock and invested in a stock with strong prospects, overall they would be better off and make more money.  You need to evaluate your business as part of your earnings and investment portfolio and make an informed decision based on your situation.

When Should You Get Out?  You should get out when any additional time, money and effort you would put into the business will not realize a worthwhile return.  If putting an additional $25,000 and 6 months of effort will create something that is worth $50,000 more in 6 months, then wait.  If that same money and time will create something only worth $10,000 more, then get out before you make that investment.  You also have to consider any repercussions (such as leases, financial or other guarantees that may cost you money) in your risk-reward tradeoff evaluation.

How Should You Get Out?  If you have anything to sell and you can do it in a timely manner and recoup enough money to make the opportunity cost of keeping the business open worthwhile during that time frame, then do so.  This can be your whole business if you have created any equity in it or this can be assets.   Just make sure the tradeoff makes sense. I had a client that had a business that was generating lots of sales but losing money.  He had a hard time shutting it down because he was focused on the sales, even though it was costing him more money to keep the business open than those sales generated.  If you are in a situation like that, just walk away.  Yes, you may be able to recoup a few dollars, but if you could be making more than those few dollars doing something else, go for the higher payoff!

No situation is irreversible; while it is better to avoid putting yourself into a situation where the risks don’t justify the reward, remember to keep the big picture in mind.

Article written by
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett (Shark Tank, The Voice, Survivor, The Apprentice) produced technology competition series, America's Greatest Makers, airing on TBS and Host of Microsoft's Office Small Business Academy show. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a contributor to CNBC, as well as a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics. Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011-2015) and has her own action figure. Twitter: @CarolJSRoth