Quitting for the wrong reasons

Sometimes, it’s necessary to make the decision to close a business. It isn’t easy and it isn’t something that is done without pain and suffering in some form.

Yesterday in Small Business CEO, I read a story about a small business that was calling it quits due to “high oil prices and the economy” (my paraphrase).

A couple of comments in that blog post really rubbed me the wrong way, mostly because the owner appeared to be stuck in a mental trap about the state of the economy (more on that in a minute) and the economic conditions that she felt forced her to close up shop.

A poisoned mind

The first quote was the most poisoned thing I could think of that a business owner could get stuck in their head:

Small home based businesses like mine really donâ??t stand a chance in the current market.

Horse hockey.

In the Great Depression of the 1930s, more than 25% of Americans were out of work. On the other hand, 75% were employed and continued to buy. While that doesn’t make life easier for the 25%, it does mean that the market didn’t simply disappear, even in times as bad as that.

For every stock broker who leaped from his Wall Street office window, there was at least one who did well, and the same for investors.

The reality is, a lot of businesses got started back then. In the so-called worst of times. In fact many of today’s most successful businesses had their roots in those “bad” days. Krispy Kreme, Saab, T. Rowe Price and many many more local businesses. Try Googling for “founded in 1930”, “founded in 1931” and so on. Tons of new businesses that exist to this day that were started during that period, more than SEVENTY years later.

They didn’t give up or quit because of their state of the economy. They saw opportunity in it.

BUT, thing is, the state of the economy really isn’t the point. Your market, your products, your clients and your prospects are. Your focus, your marketing, your creativity of thought and action. Those are far more important than the state of the market.

Raise prices or quit?

The second quote wasn’t much better, but I do have to admit that I have heard this from other businesses this year – from restaurants to craft-type businesses like this one:

Forced with the decision of either raising my candle prices sky high or temporarily closing, I chose the latter of the two.

The problem with this isn’t a lack of concern for the client, it’s that she is projecting her own mental limitations about her pricing onto her clientele. In other words, she’s saying “No” for them without giving them a chance to consider their purchase.

First of all, everyone understands that prices have gone up with fuel prices, either due to shipping, due to petroleum-based ingredients, or just because those two things roll downhill to the buyer. By making the decision to stop producing items because one of the component prices went up 40% assumes that the clients don’t feel the items are still worth that much without even asking them.

While these are primarily mental issues, there are also practical ones. Because I am tangentially involved in a business that uses beeswax, this isn’t armchair quarterbacking.

Due to Colony Collapse Disorder, I’ve seen 40-50% increases in the price of (among other things) beeswax over the last several years. In fact, prices have done so more than once. What was $3 something a pound is over $5 a pound. Not to mention that beeswax is dense. It’s heavy. Yes, Virginia – it costs a lot to ship.

Yet the clients who buy those beeswax-based products not only haven’t complained, but they’re buying more than ever. We didn’t make the decision for them, we simply raised prices to reflect the economics of the product line and let them decide. They decided to keep buying.

Sometimes quitting is the right thing to do. Just don’t do it for the wrong reasons. Don’t let the pundits, the media and Presidential candidates poison your mind.

Make decisions for the right reasons. I hope she decides to get back in the game for the right reasons as well.

17 thoughts on “Quitting for the wrong reasons”

  1. I’m a little offended by this post and your reference to a poisoned mind. You quoted this as a poison phrase, “Small home based businesses like mine really donâ??t stand a chance in the current market.” I really just cannot see the logic in your determination of that phrase.

    Did it ever occur to you that this phrase is TRUE for many small home-run businesses right now? And the reason for this is because many are tapping into their personal credit, savings and personal funds to keep these businesses alive right now. Considering how the current economy is affecting everyone’s pockets right now, the effects will roll over into a home run business like that. A bigger outfit may be able to skirt them, but mom and pop businesses – I don’t think so. Not right now.

    If you don’t have the additional funds to support your home run business that may not be generating much cash flow or profit right now, then how on earth can you expect it to stand a chance? And it’s the additional funds necessary to buy fuel and food right now that are gobbling up the biz funds in a home run business situation like that. I see it happening to others right now as well. People are suffering from the current economy and small and home run businesses are especially taking a hit right now. I know vendors that won’t even spend the money to travel to craft fairs and shows right now because the fuel cost eats into the profits. In the end, it just isn’t worth it.

    And this one, “Forced with the decision of either raising my candle prices sky high or temporarily closing, I chose the latter of the two” you refer to as mental limitation projection. Hmmm . . . let’s see. I’m a consumer. Would I buy a candle for $10 on ebay? Absolutely! Would I pay $8 to have it shipped to my door? Maybe last year. But right now, I cannot justify that with all the other rising costs these days. So when it comes to situations like that, I’m not buying.

    Is that her mental limitation being projected upon me. Nope. That’s just me as a consumer deciding that I cannot justify that type of spending right now.

    I’m glad your clients are paying high prices for your beeswax. That’s good to hear. But don’t expect that to continue if the current economical situation worsens over the next coming year. Many will ultimately come to decide they can live without beeswax for a while.

    A friend of mine attended an outdoor craft fair this year that normally had many, many vendors there. This year – less than half. I don’t think she’s the only one making this decision in that particular industry right now. And I don’t think it has anything to do with “mental” limitations either.

  2. Dailia,

    First off, thanks for reading and particularly for taking the time to comment. I really appreciate it.

    As for poisoned comment number 1 (“Small home based businesses don’t stand a chance right now”), I stand by it. A bigger firm may have deeper pockets but they are also less nimble, have far higher overhead, and far less regulatory junk to deal with (with a few exceptions).

    Just because may seem economically (if not logically) unwise to travel long distances to craft fairs does not mean that those businesses cannot be successful. It simply means that they must think a little harder about how to market and sell their goods. Is a craft fair the best use of their time and money – in ANY market? Have they studied other alternatives and tested their ROI vs the craft fair?

    I don’t expect the price of fuel to drop substantially. I expect it to continue to rise. Any business owner should also expect their costs to rise, its a historic fact for both big *and* small businesses.

    As for her projecting herself upon you, no, she didnt. She would have given you the opportunity to make the decision. By going out of business instead of raising prices, she took that decision away from you and her customers.

    There are plenty of ways to work on pricing that makes it make sense to buy online, if they put some thought into it and MEASURE the results of the things they try. Some will work, some will not.

    Three things happen when markets tighten up, regardless of the reasons. Some businesses market more, thinking that they need to work a little harder to retain their position in the marketplace. Some market less, thinking of advertising and marketing as an expense instead of a means to getting more revenue, which typically results in less sales and less revenue at the worst possible time. Some stop marketing and sales altogether.

    Guess which ones habitually are around when the markets start to loosen up and grow again?

    Giving up is guaranteed not to work.

    By the way, when I say “mental limitations”, I do not mean to say that anyone involved is stupid. What I mean is that their pricing values limit their analysis and decision making by assuming that their clientele feels the same way they do.

    Think of someone working in a Ferrari plant in Italy. They might make $25 an hour. They look at the car they are building and think it is insanity to pay $250,000 for a car. Yet people line up to pay just that and more. Are they insane? And does it matter if they are?

    The point of all this is that we are not our customers. They often think differently than we do – more often than not, in fact. Projecting our values onto them is a mistake.

  3. Mark, I could not agree with your post more. Escalating costs are certainly a constraint no one can control. Therefore, we must concentrate on what we do have control over marketing, creativity, and innovation.

    Stinkin’ thinkin’ becomes a self-fulfilling prophecy. If you believe that “businesses like mine really donâ??t stand a chance in the current market” and that were true – we would all be doomed. It just makes no sense.

  4. Mark, Thank you very much for linking back to my article. I am glad that you took the opportunity to offer your point of view. I will take your opinion into careful consideration.

  5. Amanda,

    You’re very welcome.

    By the way, the “stinkin’ thinkin'” that Greg refers to in his comment is something that Zig Ziglar talks about. He has some free podcasts on iTunes, highly recommended.

  6. I must agree with Dailia on this. Merely thinking harder or taking precious time to run ROI on promotional choices is not going to stop the red ink. If fact, most of the time it makes the situation worse. By changing promotions, products, prices or business models, many customers get turned off. Customers like consistency and that’s why they continue to buy from small business – or big business for that matter.

    Sometimes I wonder if anyone who posts arms-length comments has ever faced the choice that Amanda faced.

    Customers have all kinds of choices, including not buying anything. In hard times, they are thinking about essentials only. By being steadfast or perseverent or clever does not stop the overwhelming evidence that an owner’s business cannot survive.

    One last note: if you don’t think like your customers, always, you won’t survive either.

  7. Steve,

    Glad to see you here, thanks for sharing your thoughts.

    Regarding my arms-length comments, I’ve started, owned, sold, closed, bought and grown a number of businesses. Some did well. Some did not. So yes, I have faced Amanda’s situation in one form or another, more than once.

    I absolutely agree that you have to be totally in touch with how your customers think. Robert Collier once said a business owner needs to “Enter the conversation already going on in the customer’s head.”

    You don’t necessarily have to adopt their sense of value, but you do need to know what it is so you can serve them well.

  8. @Steve

    Great points Steve, thinking like a customer is crucial and we also need the ability to switch back into the entrepreneur mode to gain perspective and then figure out what to do. I like what Steve Jobs said, “We all hated our phones and decided we would build a phone that we love.”

    @Mark

    Glad you attributed that quote stinkin’ thinkin’ Zig Ziglar.

  9. Mark,

    I was beginning to wonder if I was the only person that read her blog that thought this way. I was the first commenter over there. I just think small business owners need to be honest with themselves. If you convince yourself that rising prices put you out of business, you’ll never “grow up” as a business owner.

    Do some business owners set up their manufacturing business thinking their cost of goods will remain static? I certainly hope not. There are many reasons to close a business…and she may well be justified in closing – but, blaming the closing on cost of goods just doesn’t make sense. Especially since her “prices didnâ??t increase as much as (her) competitors who use straight paraffin”. Really, business owners need to get to the bottom of their failure. Is it a failed business model? The unwillingness to change in a changing market? What?

    If we can get to the truth behind a failure, then we have opportunity to fix the problem. Opportunity to grow as business owners and as a business. And maybe not make the same mistake twice.

    -Dan

    Dans last blog post..Not Just Another Pretty Face(book)

  10. Some excellent points — and I appreciate the conversation here. Some tough decisions, and I don’t envy anyone that feels caught between such unattractive options.

    Mark, thanks for extending the discussion.

  11. Hi Dan,
    I think maybe your thinking “too big” here. I really wouldn’t classify her home run candle crafting business into the manufacturing category. It’s a home run craft biz. Yes, she’s making and “manufacturing” candles – but this was a one woman show and the manufacturing was most likely done in her home. This isn’t someone running a factory and pumping out hords of identical products. She’s actually an artist. She wasn’t mass producing boring jar candles. She was creating one of a kind hand-whipped candle creations. Each was unique and each was hand made. Right down to the sprinkles on top.

    When you’re an artist producing one of a kind crafts, you cannot manufacture them or mass produce them. If you do, the appeal is lost. They become just another candle.

    As for producing more, she’s a one woman show and each of her products was manufactured by hand. You cannot replicate that on an assembly line. As for introducing new products, I’ve purchased from her before and she did that. But again, in these times, we can live without the luxuries in life like hand cream, candles, air freshners, tart burners, etc. As for raising prices and letting your customers decide, she did that too. And ended up selling even less than before. Increased prices and costly shipping? Wasn’t very appealing to customers in these times. As for negotiating with suppliers, well, when costs rise – they rise. I’m sure she could’ve gotten a deal for purchasing in bulk, but then her funds would be tied up in her supplies and what if you cannot sell them because demand for them has dropped? Remember, this is one woman working from her home and tapping into personal funds I’m sure. And as for changing the biz model altogether, I don’t see an answer for her particular situation on that one.

    Like I said earlier, it’s not that what you speak of cannot be done. I know it probably can. But for a one woman show working from home, it’s alot. And I don’t mean to have a “defeatist” attitude here. I see where your coming from. But I’m just not sure that it applies here is all.

    I don’t consider this a failure either. She’s only temporarily closed her doors. The biz wasn’t turning a profit. Demand for her product dropped. Tapping into personal funds was no longer an option. She never had the dream to go global or mass produce. This was a passion that she managed to turn into a home run biz. It was meant to supplement the household income, not put her on the cover of Fortune 500 magazine. And in a situation like that, when your biz isn’t generating cash, your products are heavy and costly to ship, when your customers are making cutbacks with regards to luxuries in life, when the cost of your supplies has increased significantly and MOST IMPORTANTLY – when the current economy decreases the market demand for your product – you’re in a bit of trouble.

    She may have had other options here, of course, but I think she chose the one that was best for her . . . a temporary hiatus.

  12. Dailia,

    Regarding that temporary hiatus, I hope youre right. If they are as fancy and artistic as you note, I suspect there is stronger support for a higher price than might be expected.

    The biz I referenced yesterday re: the beeswax is of the same nature, btw.

  13. This comment may not fit in here and this may be the wrong audience, but here goes anyway. To Dailia’s comment on not trying to be “defeatist”: what’s wrong with that? Why is every entrepreneur or guru afraid to explore this sane, and most times, life saving attitude? It seems to me that more people should absorb the cold hard facts about the odds of making a business succeed. Now before everyone takes me to task on this, my definition of success includes self-fulfillment, family welfare and well-being, and the all too important ability of the business to produce more money than the entrepreneur would have made working elsewhere. Because that final point is the elephant in the living room. The stress on people and families can seriously and negatively impact them for the rest of their lives. So okay, let’s hear from the “successful” business owners who think I’m crazy, or a crank, or both. Thanks everyone.

  14. Steve,

    Everything fits as long as its reasonably on topic, so please, say what you think. The world doesn’t need more yes-men:)

    Notice that I didn’t ever say don’t quit. I just said don’t do it for the wrong reasons. Amanda’s may have been right for her. Time will tell.

    PS: You’ll have to try harder to be considered a crank:)

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