. Twenty percent don’t survive the first year. Despite those statistics, you will find little written about what happens when a startup reaches the end of the road. As a founder, understanding what happens if your company shuts down will help you make better choices and be ready for any outcome.As a startup leader, every day you are working full time to make your business a success. Making a plan at the beginning for what to do if things don’t go as planned enables fast pivots if needed.
While operating at a deficit is expected in many startups, identifying the warning milestone assumptions between your business and insolvency is critical. Document your key revenue or spending milestones, thresholds for cash on hand to cover critical business needs, and the last resort costs of severance and winddown services like HR and accounting.
For investors, employees and partners, as soon as a shutdown becomes certain, everyone views the business from a different perspective. You need to understand those new points of view:Pre-shutdown, every dollar they put in had the potential to come back as $10 . At shutdown, their top priority becomes reducing spend and limiting liability. Everything needs to move toward those goals to keep investor support.