It’s been said that many businesses fail within the first few years. The statistics differ when it comes to just what percentages of them fail verses the percentages that actually make it.

Startups are no different in that some make it and some don’t. But if you have a failing startup, getting out of it gracefully is possible.

Accept the Facts

You may feel that you personally are a failure when your startup doesn’t make it. After all, crushing debt, fear of what the future holds, or a damaged reputation would leave anyone feeling defeated.

But you must accept the facts and own up to the responsibilities you have. Act quickly and decisively to get out of a failed startup gracefully.

Don’t put off what is inevitable. Even if you think a turn-around could happen soon you may simply be putting off what must be done anyway.

Sometimes the facts are the facts and nothing will save your failing startup. Therefore, don’t rely on temporary band aids to fix bigger problems.

Preserve Cash

Preserve as much in cash and assets as you can so you can begin closing the business. Try not to spend everything to save your startup once you realize it is going under. That way you have some money left to complete the business closure.

The last thing you want to do is ask investors for more money to pay debts so the business can close. Creditors of the business will go after the investors to collect if bills are left unpaid.

To prevent this, get as many debts paid off as possible. This includes payroll and withholding taxes which have to be paid. If there are wage claims, sick pay, vacation, holiday, or severance these must also be paid.

If the business can be sold, sell it even if you have to reduce the price or sell it off in pieces. It may be hard to take a reduced amount but you must do what needs to be done to pay off debts.

Communicate with the Right People

Once it is clear your startup is closing you need to let investors, board members, and certain others know. In fact, as soon as you are thinking about closing they should be informed. This allows them to provide their input and can prevent hard feelings or injured personal relationships.

Notifying them also lets them know you value their advice and thoughts despite the failure of the startup.

On the other hand, do not let the media know. It is best to keep the information only with those who need to know in the beginning. A plan for informing the public and thanking loyal customers can be developed later.

Ask for Help

When you are getting out of a failed startup gracefully make sure you have a friend or relative you can talk to. You will need someone to give you support and advice.

Talk to your family and make sure they know what is happening with your startup. It can affect them so they need to be involved an on board with closing the business.

Make a Recovery Plan

When you’re getting out of a failed startup gracefully you need to make a recovery plan. It isn’t easy to pick yourself up, dust yourself off, and start again, but you must in order to survive.

Take stock of your finances and debts. Immediately stop spending on anything that is not absolutely necessary. You need to preserve as much income as you can so you can still keep your personal bills paid.

Determine if you want to try re-entering the workforce and update your resume. Of course, you may decide to choose an alternative career path altogether. Whatever you decide, when you interview, sell your experience from the failed startup as a positive.

There is no question that having a failed startup is going to be a setback. However, getting out of a failed startup gracefully is possible using these tips.


Kayla is passionate about helping people get their finances in order so they can pursue a life of freedom. She quit her job to work for herself with over $148,000 of debt and swears it was the best decision she's ever made!

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