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Episode Host: Henry Lopez is a serial entrepreneur, small business coach, and the host of this episode of The How of Business podcast show – dedicated to helping you start, run and grow your small business.

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Resources:

Books mentioned in this episode:
[We receive commissions for purchases made through these links (more info)].

• The Dip: A Little Book That Teaches You When to Quit (and When to Stick) by Seth Godin

Related Podcast Episodes:

Episode 532: Is Your Business Model Broken?

You can find other episodes of The How of Business podcast, the best small business podcast, on our Archives page.

Sponsor:

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Transcript:

The following is a full transcript of this episode. This transcript was produced by an automated system and may contain some typos.

Henry Lopez (00:11):

Welcome to the How of Business podcast. This is Henry Lopez, and on this episode, I’m going to explore the complex and also emotional topic of when to quit. When do we know to quit versus continuing to fight and persevere? When do we quit a project or a marketing campaign or a product line, or an entire business model, or perhaps an entire small business? When do we quit versus when do we keep fighting to get through to success? You can find all of the Howa business resources, including the show notes page for this episode and learn more about my one-on-one and group coaching [email protected]. I also invite you to please consider supporting this podcast on Patreon, and please subscribe wherever you might be listening so you don’t miss any new episodes. And thanks to a few of my recent coaching clients, including James, Patrick and Jason and Kara, I look forward to serving as your business coach and helping you achieve your business goals.

Henry Lopez (01:07):

So this episode was primarily inspired by a book that I read recently titled The Dip by Seth Godin. I’m a big Seth Godin fan, as I’m sure many of you are, and I’ve read several of his books, but I didn’t know about this book. It came out seven or eight years ago I think, and it was actually recommended to me by one of my clients and friends. Ava Ava’s, the owner of Maui’s Finest Gifts. So thanks Ava for turning me on to this book. It’s a very short read, so I got through it pretty quickly and it’s very insightful because it touches on this very complex and emotional topic of knowing when to quit. So it’s inspired by that and also other content and other episodes that have created about when do we know that our business model is right or broken. And so I think those are interrelated.

Henry Lopez (01:52):

The Dip is a book, as I said by Seth God, and then it explores the concept of what he calls strategic, quitting and persevering. And it emphasizes that success in anything a project or a business often involves pushing through challenging periods. That’s the dip, but also knowing when to quit if the effort isn’t worth the reward. But that’s the tricky part. If it only were that easy, how do we know if we are in what he calls a cul-de-sac, which is where we are in a dead end versus just in the dip and we need to keep fighting? That’s tricky, and I don’t know that there’s a straight answer to that. I don’t know that the book gives us an easy answer to that, but it gives us some clues, some things to think about, to determine are we just in a dip and we need to keep fighting through to get through to success?

Henry Lopez (02:40):

Or are we at a cul-de-sac or a dead end and we need to adjust or pivot or quit that idea? That’s what the book is about, and I think it’s such a complex and difficult subject for us as small business owners. Again, sometimes the dip could be your current business model, which I’ve spoken to often on this show and understanding that’s broken or not. And it could be that we find ourselves in a dip and it’s as a result of a broken business model. So I’m going to explore through that when to pivot, some ideas on when to pivot perhaps again, by adjusting or fixing your business model and when to perhaps continue and persevere to get through to be the best in a particular category. There’s a quote I think that’s relevant here from the book. Extraordinary benefit accrues to the tiny minority of people who are able to push just a tiny bit longer than most.

Henry Lopez (03:31):

And so that’s the idea here that he puts forth and that makes sense. And I have found to be true that we do need perseverance. We do need to be able to outlast the competition sometimes. We do need to be able to give it our best effort and not quit when it gets hard. I see that so often with people who are trying to start a business, but it’s easy, relatively speaking when you’re in the more exciting phases of an idea and thinking about it, but then the hard work starts, or then you start your business and it doesn’t quite grow as rapidly as you had projected. Well, that might be that you’re in that dip and we got to fight through. We got to continue to persevere to get through and be successful. So to further define the dip, it’s that critical low point in anything that we pursue that is the separation between success and perhaps from failure.

Henry Lopez (04:24):

This is the definition and summary that Seth Godin gives in the book. The Dip. The Dip is a challenging period between starting something and mastering it. So think about that between starting something and mastering it. Mastering it could mean that you’re good at that particular skill or task or whatever it might be, but it also could be at a higher level mastering your business being the best or first or second place in a particular marketplace. And it’s so that’s that temporary setback that separates those who persevere and succeed from those who quit too soon. So that’s what makes it even more difficult. Is it something that I need to quit and do something else, or am I quitting too soon? Boy, that’s a hard question, but that’s what we’re challenged with as business owners. So it’s the point where effort increases. We have to increase our efforts to get through the dip, but the rewards are not visible yet.

Henry Lopez (05:18):

We don’t know what’s on the other side. And the key is recognizing again, whether you’re in the dip, which leads to long-term success, if you will continue to fight through it or a dead end or what he calls in the book, a cul-de-sac where quitting is the smarter choice and then doing something else with that resource, your time, your money, your people, whatever the situation might be. So this concept of quitting in the dip or being in the dip and deciding whether you quit or not is about strategically quitting dead end pursuits while pushing through challenges that lead to long-term success. So determining where are we in a dead end or just a dip. Now, this is different as I thought about this. Is this the same as what they say all the time? Failing fast, you got to fail fast. Well, there’s a difference here.

Henry Lopez (06:05):

The startup philosophy of failing fast encourages us to make rapid experimentation. Learning from failure, the MVP approach and then quickly abandoning ideas that don’t work. That’s different, that’s a different situation. The dip is about focusing on perseverance when the payoff is worthwhile, at least that we estimate that it’s worthwhile while failing fast is about quickly identifying and eliminating flawed ideas. So entrepreneurs should persist through the dip when success is achievable, but quit or pivot quickly if the business model is fundamentally broken or the idea as it turns out is flawed once we’ve had a chance to test it and validate it. So the key is knowing whether you’re facing a temporary challenge or an unsustainable dead end. And I have to tell you, there’s no book. There’s nowhere where we get an exact answer on this. This is why this is hard. This is one of the reasons not everybody goes into business ownership.

Henry Lopez (07:03):

What we end up doing sometimes as business owners, or actually more than sometimes, often I observe, we continue fighting in the face of something that’s just not going to work. And often that’s because the business model is broken. It doesn’t allow for profitability or at least sufficient profitability, and then it doesn’t allow you to scale beyond yourself, let’s say. But we keep fighting because quitting is failure and none of us like to fail. And so that’s one of the reasons, probably the primary reason why this is so hard. So Seth Godin says in the book about this, the dip is the long slog between starting and mastery. And so recognizing the dip is essential to deciding where do you go next as a business owner and an entrepreneur. So if the dip is that long slog between starting and mastering or achieving success, a cul-de-sac again is a situation where you work and work and nothing much changes.

Henry Lopez (08:04):

There’s no progress or no small victories. And so that leads to exploring a little bit more about how do you know when you’re in the dip and you need to keep going versus you’re at a dead end or at a cul-de-sac. So the work is getting harder when you’re in the dip, but you’re still making progress. You see that you’re making progress, and sometimes that’s a feel, but you know that you’re making some progress. Are you seeing incremental improvements or wins even if they’re small? Do successful competitors or role models in your field confirm that this is a normal phase? So you might get some validation, whether external or from your mentors or coaches or partners or others that you depend on. That’s one way. Is there a clear long-term payoff to the path that you’re on? So if you push through, if you continue in the dip, will this lead to a significant advantage?

Henry Lopez (08:57):

You still believe that or achieving that market position or personal mastery if this is something personal or will quitting now mean wasting that momentum and effort that you’ve already built? If you still believe in the mission and see a future in the path that you’re on, but you’re in the dip, then again, ask yourself, do you feel that passion or conviction for the end goal? How does it feel to you about whether you’re on the right path or not? Would you regret stopping knowing that success was possible with more effort? And are your setbacks, are they fixable with adjustments? Not necessarily a sign of a completely broken process or model? Can you approve or slightly adjust your approach? Maybe your marketing, your pricing, your sales strategy instead of abandoning the effort entirely? Are others succeeding in this area proving that it is possible? That might be another indicator that you’re just in a dip and you need to keep working at it.

Henry Lopez (09:55):

Keep fighting. So also, are you willing to do the work required to reach the other side? Do you have the energy? Do you have the resources? Are you still committed to that effort even though it’s extremely hard? And again, you’ve got to have the resources. That sometimes is why we have to quit is we simply don’t have the resources, time, money, energy to push forward, to continue pushing forward. If nobody else is succeeding in that particular idea or field or venture or segment, then maybe you’re not in a dip. Maybe you are in a cul-de-sac. That’s something to look at. If you keep investing all of that effort, that time, money, and energy, and nothing improves and you make no adjustments to change that, then you may well be in a cul-de-sac or a dead end. If there’s no meaningful reward to pushing through, then again, you’re probably in a cul-de-sac and quitting or a significant pivot is probably the smarter choice. So it’s about asking yourself, am I struggling or is our team struggling? Or is the business struggling because this is hard but worthwhile or because it isn’t working at all? If the answer is hard but worthwhile, then you got to push through. You’re in a dip. If the answer is no progress, no payoff, you don’t see a path forward, then it’s time to quit that strategy, that tactic, that business model, or maybe even that entire business.

Henry Lopez (13:07):

Now, let’s look at this from the perspective of what are the potential benefits that we might be able to realize as small business owners of quitting the dip, quitting because we believe we’re in a cul-de-sac or a dead end as opposed to being in a dip that we need to keep working through. So Seth Godin in the book, the Dip emphasizes that quitting isn’t failure. It’s a strategic move when we apply it correctly. Now that’s easy for him to say it nonetheless, still feels like failure to me, but I understand what he’s putting forth here. And so quitting the wrong pursuits, of course, which is what we’re focusing on here, it can lead then to greater success, efficiency or fulfillment For small business owners. Quitting at the right time can provide several potential benefits. One is freeing up resources for more promising opportunities. It’s an opportunity cost that time, money, and energy, those things are limited resources that we have.

Henry Lopez (14:01):

As small business owners, it might just be you or you and a very small team, certainly probably a small budget. So quitting an unproductive effort allows you to redirect that energy, that time, that money towards something else that might be productive, a different business model altogether, a different product line, a different market, something with higher potential. So you might’ve been spending months, for example, trying to compete in an oversaturated market because that was ideally where you wanted to be, but it might be to your benefit to shift completely and quit that market and shift to something else that you’ve now identified another market or niche that’s underserved. So the quote here that applies from the book is, quit the wrong stuff, stick with the right stuff, have the guts to do one or the other. The other benefit is eliminating that sunk cost thinking. Maybe you’ve heard that term before, but a lot of business owners will hold on to, and I’m guilty of that as well, to failing ideas too long because you’ve already invested time and money.

Henry Lopez (15:06):

And so strategic quitting helps us avoid, if we think about it that way, helps us avoid that emotional attachment that we might have to sunk cost and encourages us instead to make more rational decisions about the project or the idea or the business. So for example, a business owner may have well spent thousands on a product that just isn’t selling, but if demand isn’t there, it’s better to cut losses early than to keep throwing money at it. Another potential benefit of quitting is that you can instead focus on what you can be the best at. Not all pursuits lead to mastery. If your business model, for example, doesn’t have a clear path to becoming the best in your niche or at least second place in your niche, in your market, in your segment, then quitting might allow you to pivot into something that has more potential benefit.

Henry Lopez (16:00):

A great short quote here from Seth from the book on this quote, quit or be exceptional, average is for losers, and yet another potential benefit is avoiding burnout and frustration. When you stick with a dead end idea or project or business, it drains motivation. Of course, it drains your finances and even your personal wellbeing, knowing when to quit or making that decision to quit because you’re at a dead end preserves that mental and financial health, and it gives you the freedom now to pursue with energy a business or an idea or something else that better aligns and leverages your strengths. So a small business owner who might be working 80 hours a week with little financial return on a business, it might be better off that you quit that model and start fresh with the leaner, perhaps more scalable business. Because remember, if it’s not going to generate sufficient profits and if it’s not scalable, you probably have a broken business model.

Henry Lopez (16:59):

And then the other benefit that comes from quitting a dead end is that quitting opens up room for creative reinvention. When one idea isn’t working, stepping away can lead to new insights, new markets, as we talked about, new segments, entirely new ventures that would have been overlooked and that certainly you would not have been able to pursue if you’re still slogging away in a dead end situation. So strategic quitting isn’t about giving up, it’s about cutting dead weight. It’s about ending those projects or maybe even an entire business and focused on what truly matters, what’s going to produce those results. As small business owners, we should quit what isn’t working, refine what has potential and push through the dip only when there’s a clear path to success. And I understand that sometimes we don’t see that, and we need a little bit of time in that dip to realize whether there is or isn’t a clear path to success.

Henry Lopez (17:59):

I’ve mentioned that. I’ve spoken previously about this concept of is your business model broken? And if you haven’t already encouraged you to listen to episode 5 32, titled, is Your Business Model Broken? On that episode, I explore this question of how can you tell if your business model is broken and how can you fix it? So if the dip that you’re in, if it’s because of a broken business model, then you’re at a dead end. You’re at a cul-de-sac. No matter how hard you keep trying and how much more time and resources and money you might put into your business, it’s not going to get to success. You’re not going to achieve success because the business model is fundamentally flawed. That’s an example. At the highest level, our entire business when we need to quit now, quit can be interpreted and applied many different ways, but certainly it should mean at a minimum that we need to examine our business model and perhaps completely shift or adjust the business model.

Henry Lopez (18:53):

And so what does that mean? In that episode, I defined what is a business model, but to put it concisely here, a strong and healthy business model supports a small business that is consistently and sufficiently profitable and that can scale. So beyond that episode, I’ve done a few other more detailed episodes. Episode 5 37, is Your Business Profitable, which is one of the components of a healthy business model? Episode 5 39, is your business scalable? Can it grow in particular? Can it grow beyond just you? And then finally, episode five 40, is your business model competitive? Can you compete against others? Do you have a differentiator or are you just a me too? Is your offering ubiquitous in the marketplace or are you able to differentiate and therefore seek a premium for what you offer? So those things are critical to helping us determine, are we in a dip?

Henry Lopez (19:45):

Do we still have a solid business model that allows us to be competitive, to scale beyond ourselves and to be profitable sufficiently profitable? It’s got to make sense financially for us. And so that is the key component to determining, are we in a dip and we need to keep fighting? Or are we at a dead end or a cul-de-sac and we need to quit? So understanding this concept, it really is the difference often between successful and not so successful business owners and entrepreneurs. If we are in a dip, pushing through for a payoff is what makes sense. You got to fight through that hard part. If instead you identify that you’re in a cul-de-sac or a dead end, then it’s time to pivot. It’s time to adjust or time to quit. I encourage you to read the book, the Dip by Seth Godin. It’s a short read, an easy read, and I think it’ll give you a lot of insights into this concept, which is so critical for us as business owners because remember, it’s not just necessarily applied to the entire business, but at a more micro level, it could relate to a particular project or an initiative that you’re determining whether it still makes sense or not.

Henry Lopez (20:56):

This is Henry Lopez, and thanks for joining me on this episode of the How a Business. I wish you the best as you start and grow your successful and profitable small business. I release new episodes every Monday morning, and you can find a show anywhere you listen to podcasts, including the How of Business YouTube channel, and at my website, the How of business.com. Thanks for listening.