February 16, 2007

Knowing When to Quit

Will Price blogged a killer post that helps entrepreneurs and investors discover whether the source of their company's struggles is the market or the company. He points out a few ways that you can tell that your market is healthy:

Companies that are in healthy markets close enough business to:
    1. develop a clear value proposition
    2. build repeatable marketing, sales, and delivery models around common uses cases
    3. know their top 2-3 competitors cold and see them in every account
    4. are solicited for business
    5. have real, active partners engaged in common customer accounts
    6. have highly energetic cultures where the changes month to month are significant
    7. can explain what they do so that almost anyone can understand
    8. share a common mission that everyone in the company can articulate

When companies begin to fail, it's important for both the entrepreneur and the investor to determine whether or not the company can be saved. If failure is market based, no amount of money or resources or time can save it. Firing your VP Sales won't save it. It's best to just cut your losses and move on to another deal.

Perhaps this post will be most useful to those who are contemplating a startup and teetering on whether or not there is a market to sustain it. Be honest with yourself and let the numbers make the decision for you. No matter how passionate you are about your space, if there's no market, there's no customers. No customers, no company.