The existential question every early stage founder faces... but isn't ready for

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How do you know when to keep going or change course?

This is a hugely important question every early stage founder will face at some point in their journey.

But so many founders are just winging it and don’t have any idea of how to approach the question.

That leads to one of two unfortunate situations.

First you have founders who keep going well past the point where it makes sense. These founders are pushing boulders uphill with businesses that aren’t going to work - but because of their determination, passion, or perhaps some early wins that made them think they were on the right track, they keep going even though the signals say to stop and change course.

The other way this plays out is a founder gives up too soon. Most of the time, this is a founder who gives up way too soon and doesn’t go far enough to even know if they have something. But also this includes founders who have really put the work in, only to get burnt out from the grind or run out of money, even as they were building sound businesses that needed more time.

Both are extremely common. It’s way more likely that a founder gives up too early or holds on too long vs. making the call to change course at even remotely the right time. I can almost feel you nodding along with me.

I think that just speaks to how difficult this question is to get right and how few resources are out there to help founders make this call.

And honestly, this may be because the question is kind of taboo. Most people will shy away from telling a founder “you’re business isn’t going to work”, even if that’s the harsh truth. And the rah rah sentiment on Twitter is to tell every founder “just keep going”.

So I’m not here to tell you to give up (please don’t cancel me). For a lot of you, I’m here to tell you that you need to dive in deeper, that you don’t have nearly enough data or insight to tell if your business is good or bad. But for the other bunch of you… I’m here to push you to ask the question, and give you some frameworks or ways to approach the question.

And not only is this so common, but the implications and costs of not answering the question correctly are really high (so when a problem is both common and costly, we should do something about it).

Giving up too early means you miss out on the upside of a growing business (it’s like that cartoon of the miner digging a tunnel only to give up inches from a vault of diamonds).

Going too long means you waste time and resources, and more importantly miss out on other opportunities that could be life changing (and wouldn’t it be monumental to have an earlier signal that your business isn’t quite working, and it would be a better use of your precious time and resources to focus on other opportunities?).

Lastly, before we dive in - I get why it’s so hard for a founder to have a clear thought around this question. You’re deep in the middle of building something, down in the weeds, feeling every emotional up and down. You’re committed to this business and passionate about solving a problem. And it’s so so hard to know if the challenges you’re facing are the normal challenges every founder and startup faces, or if what you’re doing really isn’t working.

So read on as we put together frameworks and try to unpack how a founder can approach this existential question.

First, know thyself

The most straightforward heuristic to helping you answer this question well is just to do some light soul searching, and honestly assess whether you're the kind of founder who doesn’t get started / gives up too early, or the kind of founder who sticks with things too long.

Seriously, just think back to your job history - do you stay too long, or jump early? Even if jumping early has been positive for you, take note because your opportunistic side might be getting in the way of you going deep enough with a new business idea.

Now think about your entrepreneurial endeavors. Some of you have lots of half-baked ideas littering the path that you never went far enough with. Others have held onto ideas for quite a long time without seeing them take off.

So note which side of the question you usually land on, and account for that.

Second, where are you in the journey?

Let’s create a framework for when you should start to think about this question, depending on how far you are into your founder journey.

If you’ve been at it for less than 6 months, all things equal, there’s more to do and learn, so please keep going. The real, deep insights don’t happen until you’ve been at it for some time, and you honestly cannot really tell if an idea is good or bad until you’ve put at least 3 months of work in, usually more.

I say this often to founders I work with: investing 6 months of time to figuring out if an idea will work is an asymmetric bet (especially if you don’t quit your job or have another source of income). You either come away with a viable business idea (huge upside), or you learn and create lots of new connections (also big upside). And the cost is almost always just your time, with little money involved. But you have to take an idea far enough to really know.

On the flip side, if you’ve been at it for more than 3 years and haven’t started to see some compounding success, then you’re probably well into the stage where you should ask the tough questions, and really analyze whether you have the signals that would say keep going, or if it’s better to change course.

The zone where the question is hardest to answer is when you get a year or two into a business. Usually to make it even this far, you’ve had some wins and successes, and uncovered some interesting insights that are fueling this next stage. But this is also the timeframe when runway and profitability begin to really factor in.

If you’re in this 1-2 year phase, and you haven’t yet felt the pressure to step back - because you’re profitable, because your business is growing like crazy, because some VCs preempted you and gave you a term sheet - then stepping back to ask the question of whether you should keep going or change course isn’t existential. It might still be smart to think about your strategy and if there are ways to be even better, but you’re in the clear for now.

But the vast majority of founders feel something else. You have revenue but aren’t profitable. You’re growing but not quickly. You aren’t sure if you can raise a venture round. These are the symptoms - let’s see if we can’t unpack the root causes and some leading indicators.

Third, do you have signals that indicate the business is working?

This is the million dollar question. When you’re in the messy middle, both 1) an eventually successful startup and 2) a soon to be failed startup feel the same. So what can you look for to tell if what you’re doing has the foundations of a successful business… or is most likely not going to work.

Now remember, this is all said with the perspective that changing course from an idea that isn’t going to work (or even an idea that isn’t super freakin awesome), is a smart move that allows you to invest in and focus on opportunities that can work and be huge for you.

So if I was in the messy middle of a startup, here’s what I would look for to determine if I was on to something and just needed to stick it out a bit longer, or if I’d be better off changing course.

#1 - Can you consistently reach your customer

If I told you, gun to your head, to set up 10 customer conversations next week - could you? This is a very fundamental signal, and one that you’ll want to pay attention to closer to the 6 month mark of a new business. If by 6 months, you don’t have the ability to reach you customer, the business probably won’t end up successful.

One reason is that this signals that you are just not the founder for this business. The other thing this signals is that you don’t know how to reach or relate to your customer. It also means your customer discovery is stunted, and that you won’t have an easy go of it when you start marketing.

But if you can reach your customer - whether it’s knowing the customer directly, or through friends, or reaching them via social media, or tapping into a community, or finding a way to attract them to you - then you’re in the game. If you don’t have this, it’s one of the more clear signs to me that you should change course.

#2 - Can you pitch your business concisely and compellingly

The outcome of being close to your customer is your ability to provide an elevator pitch that clearly states who you’re serving, what problem they have, how you solve that problem or deliver value, why they would switch to your solution or buy your product, and how you’ll reach them and grow.

You might think, especially if you’ve been working on a business for a year or more, that you obviously have this. My experience says otherwise, that most founders do not have this down, and when pushed, do not know enough about their business or have too many uncertainties to deliver this.

So I would challenge you, record yourself giving a pitch. Feel free to send it to me, or your cofounder or someone you trust. Ask for brutal feedback. And be honest with yourself… was your pitch clear and compelling?

The reason this is a signal that you might want to change course is that if you can’t deliver this pitch, you don’t have a clear enough view of your business to operate effectively. You might have noticed how you try lots of things but they don’t take off. These are linked. The inability to nail down who your customer is, what problem they have, how you solve it, and how you reach them - in a way that all fits together and is consistent, will prevent you from both marketing and building product effectively.

#3 - Do your business model and GTM strategy “pencil out”

This is an important analysis that a founder can do anytime, but as you go along and you try different things and your business evolves, it’s important to continue to check that what you’re doing has the potential to be a strong business.

The simplest way to check that is to look at the combination of your price point, margins, and retention (which define how much gross profit each customer delivers to your business), and see how that fits with your go to market strategy.

You might think I’m kidding, but I’ve seen so many founders build businesses where even the best case just doesn’t make a lot of money. The lifetime value of a customer is just too low, the cost to acquire is just too high. So that even if they crack the code on a product that people want, they’ll always be playing on hard mode.

Now some business models pencil more easily. For example B2B SaaS businesses almost always work from a business model perspective if you can build something people want. Same with agencies if you pick the right customer. But many others like e-commerce or marketplaces require a lot of assumptions to be true.

Check those assumptions early and often. And if you find yourself playing on hard mode (where your base case assumptions for revenue and acquisition cost don’t leave you with significant margin to reinvest), then I would think about changing course.

#4 - Do you have a consistent and repeatable acquisition strategy

If your business model pencils, then the next step toward finding PMF is to nail down a repeatable and consistent acquisition strategy.

To say it another way, you need to get to the point where a certain set of actions, with a predictable cost, will lead to some predictable number of new customers. It could be that going to 6 conferences and following up with 150 leads will turn into 3 new enterprise contracts. It could be that spending $500 on FB/IG ads will lead to 250 visitors on your website and 10 sales of a certain order value.

If you don’t yet have this repeatable motion, you need to be asking yourself why, and what can you do to find it. And if you’ve tried everything and still don’t have it, then that’s the signal you probably don’t have a winning business.

It might be that the motion is consistent and repeatable, but doesn’t yet pencil. That’s okay much of the time. It’s important to know what does pencil. And it’s important to have a foundation of repeatable, consistent acquisition. From there, you enter a phase of refining the inputs to try and turn the corner. It’s not guaranteed - but if you’re starting from consistent and repeatable, you are in the game.

#5 - Do you know exactly how and why your customer gets value from you

This is the final signal that you have a sound business, and even if you’re feeling all the ups and downs, is a good sign that you can make it. If you know how and why a customer gets value, and can repeatedly deliver that value to the next customer (assuming they’re the same profile of customer), then you have a foundation to build and improve your product.

It’s worth noting that if you’re in this position and have this signal, but don’t have a repeatable GTM strategy, and don’t know if you’re business model pencils, then I hope that you’re in a position of low burn, and ideally you have an infinite runway because this is a side hustle. To turn a value-adding solution into a real growing business is a good challenge, and all things being equal, one I would advise founders stay in the game for. But a tough situation would be to have this (an awesome product), but not have the runway to figure out how to grow it and how it will make money.

If you don’t have this - if you have a product but customers use it differently, or get value in different ways, and you can’t pinpoint what that is, then you are sitting on a signal that you don’t really know what will make your business work. If you’re further down the road, and don’t have this, along with the other signals, I might suggest it’s time for a course change.

Parting thoughts

This is a heavy topic, and one that is filled with tons of nuance. Every business and every situation is unique, so take what I say with a grain of salt.

If you have most of the above signals - let’s say all you’re missing is a repeatable GTM strategy - and you have the runway to keep going and you know what to focus on for the next chunk of time, then I’d say go for it. But again, the heart of this discussion is that many of us think we have it, and give ourselves another 6 months or a year to figure the thing out… when the hard truth is we really don’t.

And remember, a huge determinant is how long you’ve been at this. 6 months or less, you’re still figuring things out. If you’re getting towards a year, I’d want to see the product and business model start to work, and have a solid GTM hypothesis. By 2 years, if the GTM isn’t working, it’s time for a good hard look at things.

And lastly, across all of these signals, the root cause of not achieving any of them could always be 1 of 2 things. It could be the idea itself isn’t working… or it could be that you’re not executing well enough to make the idea work. In the short run, these are really the same thing. If you’re building a DtC CPG product, and you aren’t getting the conversion rates you need, it could be because your customer doesn’t need or want your product, or it could be that you’re not good enough at marketing. But in reality, it doesn’t matter. If YOU cannot get your conversion rates to work, then you shouldn’t be building that business.