Sometimes even the most promising startup doesn’t succeed. It’s hard to know when a business has reached the point of no return. When is it time to pull the plug on a dying business? I faced these questions and more after I decided to open an art gallery.
It seemed like the perfect plan. My business partner and I would open an art gallery to sell affordably-priced, original artwork. We would market it as cost-effective way for people to decorate their homes with original artwork, and it would be a huge hit. We purchased a large amount of wholesale, original artwork and rented a small storefront in an upscale plaza.
We put a considerable amount of time, energy, and money into getting our store ready to be unveiled to the public. Once everything was finally in place, we eagerly planned and marketed our grand-opening event in early June of 2011. Our hopes and spirits were high when the day of the grand-opening finally arrived. Everything seemed to be going as planned; we even had a reporter from a local newspaper there to cover the event. Everything was on track.
However, as the days wore on, it soon became apparent that everything was not going to be as simple as we had hoped for and carefully planned. After the initial grand-opening marketing push, business slowed. When I say slowed I mean died. Calling our footraffic a steady trickle would be a gross exaggeration. And, the customers who did come through the door did not buy the quantity we had anticipated in our business plan.
We tried many different marketing tactics and enticing specials in order to increase business. We even brought in some local artists to sell their “works of art” (yes we were desperate). Our efforts did help to increase business, but it was not enough to offset the building rent and numerous other fees which go into keeping any business alive. We were losing money. It finally came to the point where we realized we were fighting a losing battle. Despite the extensive planning and the seemingly good business plan, our endeavor was just not turning out to be successful.
After our art gallery had been open for little more than a year, we realized that the business was salvageable, if we wanted to invest a ton of time and money into it. But, it would also require me and/or my partner to walk away from successful careers in the hopes of making less money than we were already making. We came to the conclusion that we would close our doors.
This decision did not come overnight. It was a slow, gradual realization that what had seemed like a very marketable business idea to us, had not caught on with customers the way we had been confident it would. It was difficult to know when to pull the plug. But, as fees mounted and our cash decreased, we realized it was our only reasonable option. After a liquidation sale, where we sold off a majority of our inventory at bargain basement prices, we finally closed our doors to the public in late June 2012.
Lesson Learned: No one ever goes into a business thinking it is going to fail.
Retail sales is much tougher than I thought. I really thought the art would sell itself. I love my services-based business. There is no such thing as a passive business. Ownership needs to be involved at some level.
Being good at one business does not mean you will be good at another. B2B business makes way more economic sense for a small business. Bigger sales typically mean bigger profits. You can only sell so much to an individual.
Killing a dying business is bittersweet, but the sweet significantly outweighs the bitter.
I made the final decision after I took a step back and essentially consulted myself. My advice to myself? “Great idea, poor execution, either dive in or kill it”. I wish I talked to myself about the business six months sooner.