What’s a more important skill in business – starting up or knowing when to give up and get out? Walter Scremin of Ontime Group shares his experience of winding up a business and his thoughts on the warning signs that the end may be nigh.
Over time, quitting a business that isn’t working is just as important as having a bright idea – in some cases even more so.
Unfortunately there is no fool-proof formula for knowing when to get out. But there are some common warning signs.
Some years ago, we at Ontime Group went into a flower delivery business. Having done a considerable amount of due diligence, it seemed logical that our smarts in providing delivery transport services would translate beautifully to flower delivery.
The business started with a bang. In the first year, we made money. We felt good about our decision and excited for the future.
In the second year, we broke even. By the third we shut it down.
This failure became a valuable lesson in fully understanding your market. While the connection between delivery transport and flowers was logical, we underestimated the emotion and vagaries of the flower delivery business.
In flowers, the people ordering are emotional, the people receiving are emotional and the creators of the pieces (florists) are emotional. This rubs off on everyone involved, creating a hot-bed environment that we’d failed to recognise when considering the purchase.
One flower delivery may go through as many as half a dozen hands, from the growers through to the delivery drivers. This squeezes margins into oblivion, putting enormous pressure on the end charges for delivery: we’re all happy to spend money on the flowers, but the perceived value of the delivery is inconsequential.
Dealing with perishables was another challenge as it introduces many uncertainties, including things beyond your control, such as: the freshness of the flowers when they were picked up; the potential for them to be accidentally damaged by a driver; how the flowers react to weather changes (especially heat); and more.
Another big issue: because you are dealing with small cash transactions passing through many hands, it only takes one dishonest person in the chain to bring it undone.
All of these variables added up and meant that, while the business started brightly, our people were soon putting in more time and energy than was viable.
Worst of all, stress levels were up and morale declined. Staff morale and company culture are so important. Our people are our greatest asset.
We could see that poor morale due to the flower delivery enterprise was starting to impact our core business, as we put too much time and energy into something that was marginal.
There is no magic formula for knowing when a business is better off being wound up, but there are a few warning signs – a successful business may experience some of these from time to time and emerge from it okay, but if two or more are persistently happening, it could be a problem.
The warning signs it could be time to get out:
1. Unpleasant surprises
Business is full of surprises, but they may also indicate you haven’t fully understood your market.
There are only so many unpleasant surprises you can keep coming up against before knowing that something deeper may be wrong.
2. Complex transactions
How many steps are involved in each transaction? How are they tracked? What is the impact on margins?
If you can’t minimise the steps in your supply chain, and can’t protect margins, questions need to be asked.
3. Office morale
Understand the office vibe. Is morale strong, or is it deteriorating?
Poor morale plays out in many ways, from arguments to lower productivity to more sick leave, and can be incredibly destructive.
4. Unwelcome distractions
If you keep being dragged away from other important tasks to put out endless spot fires, it could be a sign.
For instance, if management’s attention is constantly being diverted from core business activities then it could be a concern.
5. Weight on your shoulders
Is this business consuming you? Getting any business up and running is difficult, but pay attention to your mood.
If your sleep is suffering, if you feel down, if your other relationships are being affected, then perhaps something’s not right?
All at Ontime Group felt a huge weight off our shoulders following the difficult decision to quit the flower delivery business – we were able to breathe properly again, and enjoy doing what we do best.
Walter Scremin is the general manager of national delivery transport business Ontime Group.
Opinion: House prices not all doom and gloom
By Adam Zuchetti
Analysis: How can SMEs realistically stay competitive?
By Adam Zuchetti
Opinion: Victim blaming shows extent of harassment culture
By Adam Zuchetti