The Art of the Pivot: When to Fold a Failing Business Idea
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Starting and running a business means taking risks, but it also means knowing when to cut those risks by smart financial planning. Every entrepreneur dreams of beating the odds, yet the reality is that many business ideas don’t pan out.
The skill lies in recognizing a losing hand early – essentially, knowing when to hold ’em and when to fold ’em. This article explores that very art: how to discern the moment when a faltering venture should be either pivoted in a new direction or folded altogether before it drains more resources.
A Quick Lesson from Poker
In the game of poker, seasoned players fold far more often than they bet. They understand that conserving chips for a better opportunity is wiser than chasing a bad hand. The same principle applies in business. An entrepreneur, like a poker player, must evaluate the odds with incomplete information and decide whether to keep investing in an idea or walk away.
Luckily, these ideologies are not available to only pro poker players, as with the growth of online poker websites and tournaments, wider audiences got involved in the game and got attracted with what a strategic card game could offer.
In other words, the strategic mindset of cutting losses is no longer confined to high-stakes card tables – it’s a widely appreciated skill. In fact, folding a weak hand is seen not as defeat but as discipline.
Some analysts note that folding in poker is simply efficient resource management – players (or businesses) who can’t walk away from bad bets often just lose more in the long run.This lesson has plenty of real-world parallels.
For instance, Google famously folded many of its services and applications rather than pouring more money into them. Although some people criticize this strategy, the company remains widely successful thanks to its smart decision-making abilities.
Facing Reality: Failure Rates and Reasons
Not every business idea will be a winner – in fact, most aren’t. The numbers show how tough it is to stay in business. About 18% of small businesses close within their first year, around 50% don’t make it past five years, and only about 35% are still running after ten years. In other words, over time the majority of ventures will either pivot, get acquired, or close down.
External conditions can make these odds even tougher; for example, during recent economic shifts, nearly one in four new businesses failed within their first year – a higher rate than just a few years prior. Facing these odds means entrepreneurs must objectively assess when their idea is simply not working.
Why do so many businesses fail? Research suggests a few common culprits appear again and again. A study by CB Insights analyzing startup post-mortems found that the number one cause of failure is building something with no market need – in other words, offering a product or service that customers don’t really want.
Other top causes include running out of cash, not having the right team, and getting outcompeted. The table below highlights some of the main reasons startups cite for their failure:
| Top Reason for Startup Failure | % of Failed Startups (with this reason) |
| No market need | 42 |
| Ran out of cash | 29 |
| Not the right team | 23 |
| Got outcompeted (lost to competitors) | 19 |
| Pricing/cost issues | 18 |
The table was created by us, based on the data online.
These failure reasons show that sometimes the problem is internal (e.g., a flawed business model or team issues) and other times it’s external (e.g., an unfavorable market or fierce competition). Crucially, many of these issues are identifiable early if one is honest about the business’s progress.
For example, discovering that your product lacks market fit or that you’re quickly burning through cash are clear red flags. Instead of ignoring such signs, smart entrepreneurs either pivot – i.e., adjust the business model to find a better opportunity – or fold the venture before losses escalate.
Luck or Strategy: The Role of Chance in Success
When a business idea collapses (or succeeds spectacularly), it’s natural to wonder how much was due to skillful strategy versus plain luck. And don’t worry about having this doubt because everywhere, wherever strategy is involved and high stakes remain, people always ask the question – is this luck or strategy? The same goes not only to business but also to the same poker game that teaches strategic thinking.
Moreover, even in environments where the element of strategy isn’t highly visible, we humans tend to apply strategic thinking and contrast it with luck. I became convinced of this when I saw a post on social media where a gaming platform initiated a debate on whether or not the game of slots is a matter of strategy or just luck.
Without a doubt, in both entrepreneurship and gaming, success is a mix of skill and luck. Even the best plans can fail because of unexpected events, while some ideas take off just because the timing was right. But over time, having a strong strategy and good execution increases your chances of winning.
Experienced entrepreneurs often say to focus on what you can control — the skill part — so that when luck comes your way, you’re ready to take advantage of it instead of missing the moment.
Empirical evidence backs up the importance of skill and strategy. Many business veterans also echo the sentiment that you make your own luck. McDonald’s founder Ray Kroc famously said, “Luck is a dividend of sweat. The more you sweat, the luckier you get.” By this he meant that diligent work and persistence create more opportunities for “lucky” breaks.
