The Entrepreneur Insider network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “How do you know it’s time to drop your startup idea?” is written by Michael Maven, founder of Carter & Kingsley.
The best way for founders to begin a startup’s life is to look for a positive reflection from the market about their ideas.
Startups often fail because the team members neglect to test the market for validation of their idea and don’t look for a measured demand for their solution. Instead, they begin building their product on day one.
If you’re in a position where you’re considering dropping your startup idea, it’s likely you started building your product before you knew there was truly a demand for your solution.
So what now? Firstly, where do you stand? If your burn rate brings you too close to the end of your company life, you may not have many more options. More funding is an option at this point, but you’ll have to explain what you’re going to do differently.
If you do have room to operate, that’s great. Ideally, you need to quickly switch to a model where your progress is measured by what you’re learning about your market. Stop measuring your progress by looking at how much of your product was built today, because you clearly don’t know if there’s a fit just yet.
Unfortunately, I am no stranger to a failing business—two, in fact. But how did I know they weren’t going anywhere?
With my first business, I discovered I was just in love with my own idea. Looking at monthly figures, there wasn’t much interest after I introduced the product to the market. Although I was surprised (because surely my own idea was the greatest thing ever), I couldn’t deny the truth staring me in the face.
With my second, I discovered I wasn’t really offering a perceived difference with my product. I was just one of a thousand other me-too businesses offering a service that already existed, at least in the customers’minds.
In both of these cases, no amount of passion or determination would have saved the business. I was eventually forced to pay attention to the numbers and remain objective, even though it was painful to admit I was failing.
It’s extremely important for every company to have a dashboard that shows up-to-date progress. You need your team to buy in and agree that future decisions are driven by the data on your dashboard—not skewed by intangible things like passion, beliefs, and gut feelings based on the latest TechCrunch article.
You should also know what your numbers are supposed to look like, and make sure your current day progress matches them. For example, if you need to have conversions of 8% but you’re only able to hit 3% after multiple product development changes, then you know it’s time to drop your idea.
Fortunately, I started young, so after my failures and more experience, I finally built two companies that had healthy growth.
My team and I built CatchAndRetain by doing something that many teams have done to turn their new companies into sustainable businesses. We focused on a real-world problem that we were experiencing first hand: turning current website visitors into more revenue.
We had a network of product sites that we were buying traffic to. Although we were profitable, we were paying for advertising and had a 53% bounce rate. We had no real system to catch prospective customers and bring them back to our website either, and we weren’t working on increasing our retention rate.
Essentially, we were throwing away half of our advertising budget, which left us in a much weaker position against our competition.
So we spoke to a few different organizations and realized this was a common problem. But more importantly, companies were willing to pay for a measurable solution that worked to overcome these problems. So we ended up developing a managed solution that successfully converts more website visitors into tangible sales by reducing all of the previous issues we’d identified on our own websites. We even managed to secure some early funding in return for early access to our developed solution, which ended up working.
But we only built a solution after we learned about our market and the problems that potential customers were willing to pay to remove. It’s never too late to do this.
So even if you’re considering dropping your startup idea, you may only need to make a few changes to your strategy in order to find a good market fit.
Michael Maven is the founder of Carter & Kingsley, the market leader in developing bespoke profit growth strategies for investor portfolios and existing businesses, and also the founder and developer of the ECARR System used to power CatchAndRetain.com, an automated ‘hands off’ system which measurably turns more website visitors into customers.
Read all responses to the Entrepreneur Insider question: How do you know it’s time to drop your startup idea?
How to Prevent Your New Business From Becoming a Complete Failure by Linda Darragh, professor of entrepreneurial practice at the Kellogg School of Management at Northwestern University.
Here’s How You Develop a Successful Business Idea by Mark Caron, investor and former BMobilized CEO.
What the Most Successful Founders Understand About Business by Vineet Madan, founder and CEO of Junction Education.
This Is Why So Many Startups Aren’t Successful by Avery Roth, founder and CEO of The Startup Consulting Group.
Your Personality Could Be the Reason Your Business Is Failing by Suneera Madhani, founder and CEO of Fattmerchant.