How do you know when to stop pivoting and pull the plug on your venture?

by Anonymous

As an entrepreneur following the lean startup philosophy, how do you know when to stop pivoting and pull the plug on your venture? Is this decision easier or harder in a lean startup?

The simple answer is you don’t know when to stop pivoting and pull the plug. It’s impossible to be 100% certain without the benefit of hindsight. You can, however, make a rational decision based on the best available data from your venture. If you follow the lean startup philosophy, and carefully build your business based on tests and data, each successive iteration and product roll-out should bring you closer and closer to having a conclusion to “is there a market that my product fits into?”

When you reach a step where the data disproves your hypothesis you need to carefully proceed. Make sure you didn’t get a false negative, and if confident, think of ways to test another related hypothesis. If not possible, it might make sense to think more broadly. What other products could one build based on the available skill sets, technologies, and resources available? If you are testing these different hypotheses in a “lean” fashion, you should have more resources, and thus time, to conduct more tests before you have to pull the plug.

I would imagine that in most companies there is a momentum that is hard to stop. Once a team is built, a vision communicated, and investors on board for a particular idea it can be tough to realistically assess the situation and make a rational decision of whether to pull the plug. The benefit of building the company “leanly” till this point is that the inertia, and by this I mean primarily money spent, to get you here is the least amount needed and would make the decision less difficult. On the other hand, if you spent $10mm to conduct a test that fails you would have a pretty high bar (obligation) to keep pushing on the path towards the original vision.

So while I do see the lean startup being in an easier position to decide whether to pull the plug or not, we cant overlook the simple truth of human emotion. No matter how closely you follow lean principles, and are data driven, you will always have some ego/emotion tied into a business. Being able to overcome these feelings and look clearly at the data is probably more important than the “leanness” of an organization to making the “pivot or pull-the-plug” decision.