7 Key Factors Every Entrepreneur Should Consider Before Throwing In The Towel

packers-dont-throw-in-the-towel1bIn last week’s post, I shot a video discussing the battle of fight vs flight when entrepreneurs face adversity. Today I want to discuss 7 key factors every entrepreneur should consider before he or she decides to throw in the towel.

Though I don’t believe an entrepreneur should ever quit, I do believe however, that there are a number of reasons why a company may want to stop, re-assess their situation and re-gather.

A friend and former colleague, Daymond John from ABC’s, Shark Tank did this a number of times with his clothing brand FUBU. He shut down FUBU a number of times to re-gather and come back with a new plan. The result? … He finally got it right and now has shipped over 7 billion dollars to date. More on Daymond and his creative hustle, here.

In my opinion, you have to put your company through a litmus test to determine whether you have what it takes to continue, or whether it may be time to re-think, re-structure and change your plan.

Here are 7 Things every entrepreneur should consider before throwing in the towel.

1) Proof Of Concept

Many people believe disruptive products or services are the key to the kingdom. The problem with disruption, however, is that if you are being disruptive, you are most likely trying to create a market that is not yet proven, thus you have to establish the proof of concept in a new and unproven market.

Proof of concept is quite simply, evidence that there is a customer base for what you are selling. 99% of companies are not disruptive even though they may think they may be. Being innovative and being disruptive are completely different. The following is the Wikipedia definition for disruptive innovation:

A disruptive innovation is an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology.

Take a look at your brand and establish whether what you have created has a proof of concept.

If you have established a proof of concept (or you are entering a market that has already showed proof of concept) then I would advise against throwing in the towel. Perhaps you need to work on your differentiation, namely, what sets you apart from your competitors.

2) Traction

Much like proof of concept shows there is a market for what you are selling, traction shows that, not only is there a market for what you are selling, but that the market actually wants YOUR product or service compared to (or in addition) to your competition.

Too many people establish their product or service without the customer in mind. This is a huge mistake. I wrote a post about it called, How To  Brand Like An Idiot.

Developing traction doesn’t mean you need to put your product in a thousand stores, it simply means you have to put it in enough stores to show that your a product or service is something the market has a need for. More simply put, it provides further proof there is a customer for what you are selling.

If you have developed some traction, I would advise against throwing in the towel.

3) Distribution

After you have developed traction in the market, you need to expand your distribution enough to show that your product or service is scalable enough to make a living (and hopefully more). If your market is too small to make a living on, then you may need to re-think and re-strategize and develop a product or service that reaches a larger demographic.

To be clear, this doesn’t mean you have to create a product or service for a large demographic. Many entrepreneurs do extremely well with a very small market size however the smaller your market, the larger your margins should be on what you are selling. Which brings me to the next factor…

4) Profit

To reiterate, you don’t need a huge market in order to have a successful brand. There are many brands that have a small market and flourish because what they are selling has a high price ticket.  Someone who makes 1000$ profit on every sale and supplies 100 stores makes $100,000. A company, on the other hand, who makes 100$ on each sale needs to supply 1000 stores to recognize the same profit.

If you have a product or service that has good margins, have already established proof of concept, gained some traction and established some distribution, I would advise against throwing in the towel.

5) Revenue

The same math applies to revenue. If you sell 1 widget to 1000 stores for 1$, your sales are $1000. If you sell 2000 widgets to only 1 store for 1$ your sales are double even though you only supply one store and your competitor sells 1000 stores.

Whether your product or service is low ticket or high ticket, if you keep an eye on the margins to make sure your sales are above your costs and there is enough revenue to show the market wants what you are offering, I would recommend against throwing in the towel.

6) Brand Recognition

If you are a marketing driven company, increased distribution and revenue should increase brand recognition.

It normally takes a lot of hard work and effort to establish brand recognition. The more brand recognition you have, the less inclined you should be to throw in the towel.

Brand recognition creates the one word that every business loves… licensing. Licensing, in my opinion is the entrepreneur’s trifecta… It allows them to have someone else help grow their brand, spend the money to grow it and pay them a fat royalty payment at the end of the year …  I will talk about the value of licensing over the next few weeks.

If you have established any level of brand recognition, I would recommend against throwing in the towel.

7) Hip-Pocket Clients

Take a look at your customer base and take a look at those customers who are in your hip pocket. Hip pocket customers are those customers who support you no matter what. Remember, 40 customers in your hip pocket are worth a heck of a lot more than 400 customers who will drop you the moment your sales slow down.

If you have a good enough supply of hip pocket customers, I would recommend you don’t throw in the towel just yet.

The Wrap-Up

Take a close look at these factors above. If you have a number of these on the list checked off, there should be a way to continue on your path to success. Remember, every entrepreneur is going to come across a million obstacles in his or her journey. The key is to know when to keep pushing, compared to when to regather and re-assess.

What challenges have you been through that have made you want to throw in the towel?

What did you do to overcome those challenges?

Have a great day!




“MJ takes a new and exciting approach on how to teach entrepreneurs.”

Daymond John
Co-host of ABC's, 'Shark Tank'

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2 thoughts on “7 Key Factors Every Entrepreneur Should Consider Before Throwing In The Towel

  1. Hey MJ

    Great ideas. The key points are very relevant to an established business model in an established market; with established sales and demand. This is a great plan to follow for the entrepreneur who is running the business – has clients and data to review. At first look one might think that is the only model it applies to. Yet it can also apply in the start-up model in a need based – build it and they will come market or disruptive product. One can apply your seven points at pre-established review times and measure progress towards knowing the answers to your 7 and reaching a set of performance points on each.

    Hope all is well!


    1. Thanks so Much Glenn. Great to hear from you. I think you are spot-on as it relates to applying it to the start-up model as well. Using it to measure progress along the way is also a great insight. Thanks as always for your support! Have a great day and speak soon. Best- MJ

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