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Startup School – Balance Faith

And now for balancing faith. The winners-never-quit question! The how-canyou-walk-away- when-we-are-so-close-to-the-end defense. I keep coming back to Sarwar’s last comment at Dana Point: “I can accept anything but a shortage of faith from you.” Was it shortage of faith or something deeper? Given a bad day can I just quit? Is that what Sarwar meant? How do you tell true catastrophic failure from a bad bout of self pity? How do you know it’s time to walk away and do something else with your life?

Us, entrepreneurs are a religious lot. We just can’t remain agnostic given what we face and the lows that we sink to when we abandon a project. Call it destiny, karma, divine guidance, or a higher being; do a few rounds as an entrepreneur and you will not only fi nd it, you will pray to it every morning after looking at yourself in the mirror. It is our faith in our abilities and destiny that allows us to leave regular paychecks and take what the world may view as an irrational or insane bet. It is also the same faith that helps us survive adversity and it is also our faith that holds us back long after the wake is over.

How do you know it’s over? How do you know it’s time for you to turn your back, pick up the key, open the door and leave? You can’t rely on faith because faith is not rational and faith will not pay the bills. Is there an objective measure you can use to start the self-destruct sequence?

I only have one test that I have tried over time. The objective of a business is to make money for its stakeholders. Even not-for-profits and charities make money to carry on with the good work they do. What exactly is this money? Take everything that comes in as revenue, take out everything that goes out as an expense, and the difference, if positive, is cash in the bank (more or less).

If it is negative, it is like a bill that has to be paid and get paid it does from your personal pockets. Your survival as an entrepreneur then depends on the depth of your pockets and your tolerance for working 20-hour days AND paying the business for the sweet deal it has allowed you to cut with yourself. If the status quo remains the same, ultimately either your pocket or your patience will run out. When it does, you abandon rationale and move on to faith.

Making money is a little more complicated than finding a need, finding a market, creating a product, finding a buyer, and closing a deal. It requires that you do all of these in such a fashion that there is some margin left for you to take home at the end.

Very few businesses can reach this objective right away. If it remains an attainable goal and you have sufficient capital to reach that goal, have faith and linger on. When it becomes unattainable or you run out of capital, it’s time to lock up and go home. This in essence is test number two.

Faith and commitment are relevant when the underlying business model is viable, where numbers add up, and where profitability is reachable within a reasonable timeframe. When this is no longer true, faith and commitment are misplaced.

These conditions or tests are not static; a business model may be viable on day one but irrelevant or unrealistic two weeks down the road. New and previously unknown information is generated as ventures cross major milestones. It is better to ask simple questions again and again about capital, products, customers, economics, and teams to grade ideas and plans as we move forward rather than rely on initial or static analysis.

Do I have a list of questions and milestones? Yes I do. But remember, for me, the objective is to fail quickly, gather minimal baggage, and take on the next big thing. The questions and milestones are applied and tested every time you have additional information that has an impact on your answers. Until you answer the questions satisfactorily, don’t move on to the next milestone. If you get stuck at a milestone; and/or make no progress; and start running short on capital, then consider the cost of staying at that level versus trading your current venture for a better one.

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