04/02/2012 10:25 am ET Updated Jun 02, 2012

When To Quit

Generally, most people have visions of entrepreneurship that include long hours, off the beaten path business models, big pay days and freewheeling board meetings that may or may not include ping pong. Rarely do we think of failure when it comes to entrepreneurship. Entrepreneurs are repeatedly taught, told and counseled to never give up, the big "pivot" will happen soon and the light is surely at the end of the tunnel. Yet, each year, thousands upon thousands of startups fail in the United States. So the question begs, when should an entrepreneur quit?

As any successful entrepreneur will tell you, there are countless nights worrying about the business. Sometimes those nights fade into a distant memory, a war story to reiterate when retelling the company's history. Waiting for that check to clear or that potential customer to actually sign the contract are nerve wracking experiences that can wreak havoc on an entrepreneur's psyche. Many of us have heard of the "dark days" of a company's early stages. Frankly, we only hear of those "dark days" from successful companies. There are not too many books or blogs describing failure in its most excruciating detail. That's a shame. Failure is an ever present reality for any new start up so pay attention to these warning signs:

You can't raise money: Entrepreneurs are the ultimate optimists and wonderful sellers. They can sell a vision of success, profitability and growth. Investors are the ultimate realists and rarely back dreams. To be sure, raising capital from venture firms right out of the gate is a rarity so hearing a solid "no" from the VC community early on is not worrisome. Hearing a solid "no" from family, friends, colleagues, old college roommates, etc. is worrisome though. The majority of start-ups raise capital from casting a wide net amongst family, friends and colleagues. This process can take many many months so patience is essential. Yet, if the process takes longer than 8-9 months and you are hearing a solid "no" over and over again, it's a sign that either your product is not that interesting or your network isn't convinced that you can pull off the vision. Take a long hard look as you approach the 6 month period.

You can't stop running out of money: For the most part, most new start-ups come dangerously close to missing payroll, dodging creditors, or missing rent. This happens all the time and it is part of the growing pains of launching a new venture. You can dangerously skate on thin financial ice for some time and most early stage investors prefer that you do so in order to breed fiscal strength for when the good times come. Once you're on solid ground though, repeatedly lacing up those skates is a very bad idea and a sign that your nascent start-up will always remain so. There is no exact timeline for when your early stage company should reach solid financial footing. If it happens, you're one of the lucky few. On the other hand, if you continually find the company to be under water despite brief moments of relief, strongly consider moving on. Bobbing mercilessly on the "break even" seas is a telltale sign.

You can't stop changing your company: Entrepreneurs are at their finest when they are hyper focused. Investors, employees, and customers appreciate companies that stick to what they do and do it best. Although a few contrary examples do exist, repeatedly turning your company's core competency on its head should be a red flag for you and will be for the above mentioned group. Trying to boil the ocean is impossible. Stick to what you know and can do best. If you find yourself twisting and turning your company's product/offering/service just to stay alive, it's time to reconsider whether you're on the right path.

Entrepreneurship is an addictive drug that comes in many forms. The highs are a thrill ride beyond compare. The lows come in the form of embarrassing personal accountability and professional bankruptcy. Successful serial entrepreneurs know this all too well. They also know that failure is a valuable learning experience that rarely comes from out of nowhere. Not recognizing the warning signs of impending failure is the dark side of the entrepreneurial experience. So keep your head down, build your company, but be on the lookout.