Entrepreneurs are extreme optimists. Said another way, entrepreneurs are a little crazy.
Every one of us thinks that we have found a golden opportunity the market has missed, or that we can execute on an idea faster and better than other people, many of whom are equally smart and capable as we are.
When our venture is at the brink of running out of cash, we likely still believe it can survive. And honestly, it might pull through. It is a common trope that every successful venture went through at least one moment of almost failure. As entrepreneurs, it is often difficult to shut down our company before exhausting every resource because, just like we’ve always functioned, we focus in these stressful moments on the possibility, however small, of success.
The problem is that not everyone involved in the venture has the same risk tolerance as we do.
Our families, investors, and employees have different personal, career, and financial interests, and the Founder/CEO decisions in these moments of time can profoundly affect each of these stakeholders. In moments when the company is under more stress than normal, the chances of success may have changed so that it no longer makes sense for others, even when it still makes sense for the entrepreneur.
In an ideal world, we would give everyone the same information we have and let them choose whether to stay. But this may break the company and take the decision out of our hands. Telling everything may cause turmoil, indecision, and anxiety when the slim chance of success requires calm focus on the part of the team. Do we, as the entrepreneur, want that?
I argue that Yes, we should.
- Can you live with yourself if the worst happens and your employees and family ask you how you justified making this decision for them? Fundamentally, I think the fear of telling others the truth about the situation lies in (a) fear of wasting time explaining and (b) fear that they won’t agree with you. But the least you owe your team, family, and investors is an explanation, and if they disagree, it is their right to balk.
- Second, your stakeholders may surprise you and stand by you. Assuming you are a communicative and transparent Founder/CEO, you have always been clear about the challenges and opportunities the company faces. You have striven to inspire your team and instill confidence in your investors by being honest and letting them generate their own analysis of the situation. It might even be that the team will help you find a creative solution that you didn’t consider.
- Finally, your stakeholders will thank you for your honesty, and this will engender their loyalty in the long term.