When (and how) to throw in the towel

I've shut down a few businesses in my day. It's no fun. But when indie hackers shut down, it's really more of a beginning than an end. It can even be exciting — what's that next idea burning a hole in your pocket?

But the question of when to quit is a hard one. Quitting too early is common and it's a missed opportunity. Quitting too late… well that's a lot of unnecessary hardship.

I did a little digging on IH and elsewhere to figure out if there's some simple equation for when to quit. There isn't. But lots of indie hackers have been through it, and their wisdom might help.

How to shut down

Let's start with the end. Here's how to shut down. Then, we'll talk about when (and whether) to shut down.

1. If you have stakeholders (employees, investors, co-founders, etc.), be transparent with them about the state of the company from the beginning, and discuss the decision to shut down with them early.
2. Get those stakeholders and decision makers on board.
3. Let your customers know of the impending closure, and give them a date. If possible, give them at least a month, preferably more. Give them alternatives of where to go — if you're sending them to a competitor you can even set up an affiliate program with them.
4. Get your ducks in a row for what you're going to do after you shut it down.
5. Shut down. Make your product unavailable. A lot of companies just fade out over time. Generally speaking, it's best for everyone if you avoid that and actually shut down.
6. Cancel all services, tools, etc. that you're paying for
7. Pay off any debts. Hopefully you don't have any.
8. Pay remaining money into the bank accounts of all founders and/or other stakeholders.
9. Close your bank account.
10. If you have a legal entity, you need to dissolve it. File a Certificate of Dissolution with the state where you are incorporated (in the US, anyway). This is a good reason to hold off on creating a legal entity for a while when starting up. I've found LLC Univeristy to be a really helpful resource with state-specific information.
11. Notify the IRS. Submit your final income tax, sales tax, and employee tax (if any) returns. For income tax, check the box that says it's your final return. Here's the official IRS breakdown of what to do.
12. Cancel your EIN. Here's how.
13. Take a deep breath.
14. You did it.
15. Take some time off if you can.
16. Get started on your next idea.

Alternatively: Don't do #8-11. Instead keep the LLC open and start your next business with either the same name, or with a DBA (doing business as) under that LLC. That way you can avoid some of the hassle. You can set up a DBA through your state.

Good reasons to quit

So that's that's the "how" of it. But what are some (good) reasons that you might want to throw in the towel? Let's start with what indie hackers have said.

Not enough time in the day — this one is common for indie hackers.

@TheJester12: I'm terrible at shutting down old projects! I definitely always have this idea that I'll return to something or that some new idea or pivot will make the thing successful… When I really want to shut something down is when it is a drain on my time, but isn't proving to be financially worth it.

@SkyLinx: Since I started a full time job with an event management platform (as Senior Backend Developer) I didn't really have the time and energy to work on my blogging platform, DynaBlogger, for anything concerning stuff that is not coding, especially because I was involved in 2 big projects at work, so it was difficult.

Competition was too strong. Note: If you can't keep up, that can be a good reason to stop if and only if it's within your very small niche. If some 800-pound gorilla is crushing you, niche down hard — it's the indie hacker advantage.

@akfaew: and GitHub Actions made it redundant.

@dev_bre: Skedlo was a very interesting project and I decided to shut it down with a heavy heart. I think there is a line between acting in a cluttered market vs a saturated market.

When I realized that the only way I had to be noticed in that market was to start copying functionalities from other competitors, I just started feeling that I was putting a lot of effort in a problem that was very well solved already by other competitors. Was that really worth it?

Also, my timing might have been wrong as well. When I released, other 2 platforms doing basically the same thing released pretty much at the same time. It was like fighting each other for every single user. It felt pretty toxic to me.

Trouble making ends meet. Note: It's worth considering running it as a side project if this is the case.

@jpescada: After running the business for a few months, we couldn’t reach enough growth to make a living, so we decided to close it down.

Un-monetizable.

@akfaew: That was fun, but not a viable business… the problem the app solves was not painful enough for anyone to want to pay for it…

@matosdfm: I've shut down the project as there wasn't a viable monetization strategy to implement. It got some traffic and some praise, but if it doesn't make money, it won't work - simple as that. Onwards to the next projects! Iterate until you find a product that works :)

Losing interest.

@sebschaeffer: It still feels counterintuitive to shut down a successful project but doing so gives me space to focus on something new, more exciting and more aligned with what's really important to me.

Greener pastures. Note: Be careful with this one. Sometimes it's best to take a break and look at it again with fresh eyes.

@tesnep: I've been doing full time work now. It is a very small company but they have been operational for a long time. I may end up being part of the company in the future. For me, while this may not be the move I was seeking, I will learn how B2B grows and what growing pains it brings.

@steve9: My reason for selling was greener pastures, which of course turned out to be not so green. So a cautionary tale there....

Technical issues.

@robert_williams: Despite a $48k/year ARR (private beta), Amy and Thomas decided to shutdown the first version of Charm due to technical issues…

…we’ve discovered that there’s some kind of base incompatibility with Ubuntu, which is giving us kernel panics which nobody can track down. Charm has been plagued by mystery technical problems from the beginning, when we had to backport from Rails 3.x to 2.x because of massive performance slowdowns which even Rails Core members couldn’t identify…

And just generally no traction.

@richardindie: The section of YouTube users who are at risk of deletion don't even realize it. I don't have the time or resources to educate those people. I've learnt to choose projects with an existing proven customer base. My next project has just that, stay tuned.

@gokulmadan: I gave myself a month until my birthday, to at least get 5 actual corporate customers (or even non paying users). The day arrived and I had exactly 0.

@metalhe4der: Unfortunately the business was not seeing the kind of growth that we originally thought we were seeing. Had to reassess what to do with the growth potential and we went out to talk to people who'd be in our target audience/market. We learnt that this subset of investors would rather invest in assets like real estate than touch the financial markets, simply because they mostly had negative experiences and associations with it. A lot of people also considered it gambling, so it took them away from what we were attempting to sell.

@DB39: It mostly ran hands-free. But it only ever lost money (running costs and no sales). But the reality is that AI generated art is a fast moving space right now.

And as far as I can tell, the money being spent on it is on the generation of images, rather than buying the art itself. Which isn't something I'm interested in pivoting to.

It's also gotten to the point where I need to cut projects that aren't pulling their weight. Mostly for focus. And the fact that traffic and prompt submissions have dropped off doesn't help.

@natebosscher: I spent waaay too much time trying to build the "perfect" infrastructure. As this was my first start up and I'm from the developer community, I shied away from doing the equally important work of marketing. Bad plan.

@jlogic: Basically burned out due to low growth and practically no revenue.

If you take anything away from those quotes above, let it be that there's no shame in shutting down. We all do it at some point. But I digress.

Here are some other common reasons:

• Consistently missing your KPIs.
• Trouble reaching the market.
• Churn can't be fixed and acquisition can't make up for it.
• Your life and/or relationships are in the crapper.
• Change in your life circumstances.
• You're unhappy.
• You're in poor health.
• You've got another validated product that has more potential, and you can't do both timewise.

It's also worth mentioning that there are some really bad reasons not to quit.

• You've put so much into it. Remember the sunk cost fallacy.
• Fear of failure
• Fear of what's next
• You've got something to prove

Sometimes, quitting is the best thing you can do.

Bad reasons to quit

If you're going to quit, don't do it for the following reasons:

• Getting beat by your general (non-niche) competition. Niche down!
• Shiny object syndrome
• Imposter syndrome
• Growth isn't what you expected (but you haven't tried everything yet)
• The relief of shutting down. Of course it would be a relief in some ways — this stuff is hard. But there's a reason you're doing it, even if it's hard to remember at times.

4 questions to ask yourself.

I thought these 4 questions from Y Combinator were good ones. If growth has died, ask yourself these questions before quitting:

1. Do you have any ideas left to grow your startup?
2. Can you drive that growth profitably?
3. Do you want to work on the startup that results from that growth?
4. Do you want to work with your co-founders on the startup that results from that growth?

Out of context, #3 and 4 might seem odd, but they're basically saying that doing a Hail Mary for growth can change a business, as well as the relationships within it.

Alternatives to shutting down

Deciding that it isn't for you anymore is different from deciding to shut down — you still have options. Before shutting it down, try to:

• Take a break. Set your business up to work on autopilot for a while. You can do this through automation or outsourcing the work. Then take a break! Sometimes you just need to refresh yourself and your perspective. When you come back, if you're still unenthused, then take more drastic measures.
• Make one last push (if the problem is growth).

@rahuls: If your startup is not growing at the pace you expect and you are losing hope/resources (given you have tried your best); find someone (partner/customer) in your circle that can help you make the final push. If onboarding an additional pair of eyes/help doesn't work out, MOVE ON!

• Pivot! Sometimes shifts in offerings, target market, etc. can make all the difference. It's worth a shot.

@vlucas: After using Seamless.cloud myself extensively while building BudgetSheet, I realized that I needed a major pivot after encountering a few pain points along the way (dogfooding, right?).

Since there were no other real customers using it, I just shut it down to new users in order to pivot and make all the necessary code changes. When I am done, it will be essentially a whole new product purpose built for what I need to build my own apps.

Still a no-go? Then stop working on it… but that doesn't mean you have to shut down. You still have another option.

• Sell your business. It's so easy these days. I wrote about that here.

The aftermath

I've shut down a number of projects, but never something that was overly dear to me. That said, while digging through other people's experiences, I noticed that a lot of people had a really hard time after shutting their businesses down. They felt the weight of failure. They felt inadequate. They lost hope for the future…

The good news is that I saw it said that it lasts for a few months, then passes. So keep that in mind.

I think just knowing that this is a possibility is helpful, because you can prepare for it. And if you feel down about it, you can go to that logical place in your mind and say, "Oh yeah, ok, I knew this might happen, and I know it will pass." It can also be helpful to set up a support system preemptively. Tell your loved ones that you're shutting down and you might need some support. Tell them how they can help when the time comes.

And start doing the things that you know will help you. For example, a lot of people feel better when they exercise regularly. Those people should start a habit of exercising before the final day of the business, then push themselves to keep it up afterward. Here's an old post of mine about mental health in entrepreneurs in case it helps.

Wrapping up

So wrapping up, there's no shame in shutting down. But make sure you do it for the right reasons. And give it your all first. When you do it, consider selling. And if shutting down is your only option, then do it right to avoid facing additional expenses with taxes, fees, and so forth.

I would say that I hope you never have to shut down, but it happens to just about every entrepreneur at some point. So I'll just say that I hope you pull it off gracefully.

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What did I miss?

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