Let's start out with full-disclosure: I've never run a business and watched it fail. I haven't had the experience of seeing the amount in my checkbook dwindle (or in my debt column skyrocket) while watching my dreams crash. Nevertheless, the company I wrote about last, Reiver Games, is closing shop, and it makes me wonder "What would I have done?"
Here was Jackson's, the founder of Reiver Games, reasoning, "Is it really worth throwing another huge wad of cash at the company and hoping I do things better with my next game? ... No, it's not." Jackson chose to retreat.
As a juxtaposition, read Jason Calacanis' article "What To Do If Your Startup Is Failing". He claims that the real entrepreneurs deal with it all and press on. In other words, he says that when you're licking your nastiest wounds, its time to charge.
So, is it a bad thing to retreat? Mr. Calacanis' article sure seems to indicate say so. The early portions of his article practically demonize the tactic. Of course, let's remember the audience. Is he speaking to Reiver Games, a one man, boot-strapped company with no external funding? No. His article is clearly directed toward those with employees, a certain amount of scale (at least a larger amount than Reiver for sure), and given lines like "It's time to refresh your rèsumè, tell your board you resign, sublet your place and go to Thailand", he is also expecting you have external funding. In fact, if you have a board to resign from, (my understanding is that) you've got Venture Capital funding.
Reiver Games was no where near getting funding from a VC firm, and as best I could tell from his blog, he had no intention of pursuing such a route. My curiosity lies more with a failing company like Reiver Games than Silicon Alley Reporter, and Mr. Pope's situation is the one where I wonder if I would have closed shop. Mr. Pope's predicament is where I wonder whether it would be better to retreat or charge. How do I answer that question? I go back to Jason Calacanis' article. While he may not be speaking to the same audience, one thing I believe is that life is easier if you learn from the experience of others. Hence, Jason's experience is invaluable and should not be ignored regardless of your circumstances. Hence, I go in assuming that if I just read the article, something (or many somethings) could be applied to any business situation.
What from that article can I apply to what I will now call Keiver Games, my hypothetical, failing, one-man business? The first point seems to be that I am weak loser unless I fight until bankruptcy. However, since I am a slightly different audience than Mr. Calacanis is speaking to, I will read on before I take that as the first point I can really apply.
1) "You need to figure out your runway immediately. This is really easy to calculate: you look at how much cash you burn every month and divide that into how much cash you have in the bank."
This statement can be applied; no doubt. Already, first point I take as I read through the article, I come to what made Jackson's decision. That is clear from his posts on his blog. The runway was too short.
Still I wonder if I may have kept fighting. Plenty of entrepreneurship success stories start with people that live on nothing for 5+ years before even earning enough to be comfortable. Could more runway be paved? Enough to get off the ground?
2) "You then need to look at your revenue streams and figure out if you can double them."
From what I can tell, then answer to this for Jackson was "No." Isn't that the death knell right there (numbers 1 and 2)? Your runway is short and you can't sufficiently double revenue. Bang, thwack, boom. Done... right?
3) Jason says to ask your vendors, creditors, landlord (or mortgage bank?) to hold off. Either that or ask their competitors if possible. The idea is to get 6 months without payments.
This may be a way to pave more of that runway. If you can get a few months free, that is money you could put towards increasing your revenue streams. Then again, you have to be certain you can increase your revenue. Once again, it comes back to that. Even with a little runway that this could give you, the 4th point (below) still remains true.
4) "If you can't sell your product, it's not a product; it's a hobby."
I really wish Mr. Pope could have made it--what by this definition is--a product. I wish he could have made one more push, one more charge, and made his business go. To do it, though, I think he would have had to take out a huge loan to pump into advertising and even then he wouldn't be guaranteed success. Moreover, I don't know whether Jackson felt that his sales numbers showed there would be enough interest in the games even if they did hear about them more (through advertising). So, I am now thinking I may have done what Jackson did and close up. I certainly would have closed down if I didn't think the response to my games was good enough to warrant an advertising campaign. On the other hand, I may have taken the risk, taken out a big loan, and tried a big ad campaign if there was proof that people will really like the game once they see it. It is so hard to say, but I am strange; so, I like pondering it.
Nevertheless, all this pondering means nothing now for Mr. Pope. So, what is important at this point? What's important is not how the past could have been handled but, instead, how the future will be handled in light of the past. Accordingly, I am happy that, it seems from Jackson's latest post, Mr. Pope is now learning the final point I take from Jason Calacanis' article.
5) "When one door closes, three more open up."
Of those open doors, I bet that at least one leads to another venture. Jackson, I hope that, once you are back on your feet, you've the courage to walk through that doorway and try another startup.
I wish you the best, Jackson Pope, no matter what you do with the rest of your career, and I hope you get back on your feet quickly.
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