What if the answer is no?

In Marc Kramer‘s recent Forbes article titled, The 10 Questions You Should Never Stop Asking, the Wharton School professor identifies ten vital questions that all organizations should continue to ask themselves.

Beyond being a very good list in and of itself, Kramer uses his past experience as a frustrated executive at a struggling (and ultimately doomed) business as an example of all the ways in which these questions could have helped him make better decisions, had he stopped and actually asked them.

The ten questions he identifies are:

1. What is our purpose for existing?
2. Who is our target customer?
3. Why does anyone need what we’re selling?
4. If there is a need, is it enough to support a profitable business?
5. What were our competitors up to?
6. Can you reduce expenses–without harming the product?
7. Do we have the right leadership?
8. Do we have the right employees?
9. How will we continue to drive revenue?
10. How are your employees holding up?

Of course, some of these are obvious.  Things like identifying a target customer, reducing expenses and driving revenue are all hot buzzphrases that get a lot of attention at every stage of the business.

But at least half of Kramer’s list is made up of really big, scary questions that people avoid asking because they are afraid of the answer.  These are do-or-die questions that terrify people, because if the answer to any of them is negative, then it’s time to pack up the marbles and go home.  These, of course, are the ones that I find the most meaningful.

What is our purpose for existing?
This is a tough one.  Over time, the answer to this question can become less and less clear.  In the beginning, most businesses can probably answer this.  As time marches on, as leaders change, as markets shift, as products are innovated, this answer can be increasingly unanswerable.  As a business owner, the day you can’t answer this question with anything more than, “To pay my bills!” is the day when you need to consider that the business has lost its way and out-lived its usefulness.

Why does anyone need what we’re selling?
In a world of consumeristic junk and disposable commodities, too few people really ask this question.  Obviously not every business is addressing a real “need,” and leisure businesses have tremendous value potential — as long as you are prepared for the fact that a leisure business is far more susceptible to economic trends than a need-based business is.

I went to high school with a kid whose family owned a mortuary and, morbid though it may be, from the time he was 14-years-old, my classmate fully recognized that no matter what happened, there would always been a need for his family’s business.  Not everyone can say that, but it’s always important to make sure you are clear where you fall on that spectrum.

If there is a need, is it enough to support a profitable business?
This one is hard because most business owners sell products or services that they understand, and we often forget that — as specialists in one area or another — we are not our own customers.  The trouble is, for many of us, our friends and associates often come from similar backgrounds, so it can throw off our perception of the real market size.  Just because people need what you can offer, doesn’t always mean that you have enough people within your reach to make a sustainable business out of it.

Do we have the right leadership?
This may be the entrepreneur’s biggest nightmare question of all.  Because if the answer to this is no, then it could be because we are part of the problem, not part of the solution.  Sure, the problem could be with a partner or a key member of the management team; but the problem may also be in the mirror, and answering this question honestly means that you have to seriously consider that possibility.

So, what happens if the answer to any of these sink-or-swim questions make it clear that it’s time to get out?

The short answer is that you have to decide how to evaluate your options.  For some businesses, selling could be viable.  If you have assets or a product that someone else could make a living on, then the first thing to look at is whether or not you could find a buyer, and then walk away to find something for you to do that fits better.

If the business itself is dying on the vine, then a sale is going to be out of the question, so the question is either transformation or evaporation.  One of the benefits of small businesses is that it is easier to change course in a small ship than it is in a big one.  If there is a related niche that you can shift your focus to with relative ease, then maybe that’s an option.  Or if there is a side service that you have occasionally offered that has potential, maybe it’s time to make that a core offering.

And, of course, the last option is simply to close up shop.  While that is never something to do lightly, it’s also something that really is, at times, the most appropriate and ethical solution.  A business is not a person: ending it is not something to feel guilty about, particularly if that is truly based on real market considerations.  If your business was in the pay phone business, then the fact that cell phones have replaced pay phones all over the country is simply a marketplace reality.  There is should be no guilt over closing down that business.

A responsible entrepreneur always has to be aware of the number of lives he or she is impacting with decisions.  But sometimes the cruelest things you can do to your employees, your family and yourself is holding on too long, until you are out of options and out of time.  There is a saying we always use in my business, “Bad news doesn’t get better with age.”  Just because you refuse to ask yourself the hard questions because you are afraid of the answers, doesn’t mean that the reality of those answers isn’t staring you in the face.

So ask yourself the questions.  Be honest about the answers.  And then find a way to do what you need to do with as much dignity and honor as you can muster.  While your family and employees may not like it, they’ll respect your integrity — which means when you go off to start your next business, you’ll have an existing pool of potential people ready to help you get it off the ground.