Stress test: Should your biz fold?

Entrepreneur Jay Goltz

10 questions

Is it time to shut down? Here's a test.

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(Fortune Small Business) -- Debbie Dusenberry is the founder of Curious Sofa, a home-furnishings business in Kansas City, Kans. I had heard that she had an interesting take on business and the economy, so one day I checked out her Web site.

After reading a few of Dusenberry's blog posts, I could tell she was a gifted marketer and merchandiser, that she had a loyal, stable workforce and that her customers loved her. The press clips posted on her site made it clear that the media felt the same way. And passion? Dusenberry is so into her industry that she maintains a special section on her site just for other furniture shop owners.

Yet Dusenberry sounded pretty gloomy. A mid-September blog post was a cry from the heart. Her revenue had grown but she was losing money, and she couldn't understand why.

"If my sales were up 15%, why did I take a 20% salary cut three months ago when the rest of my staff got their raises?" she wrote plaintively. "Why am I searching for 8% credit cards to get me through Xmas? Here I am again, feeling sorry for myself, being alone and struggling, wanting help from someone and no one was there...."

Her musings hit a nerve. About 20 other business owners posted comments, all basically saying they were in similar straits.

Over the years I've talked to numerous owners who had reached crisis points in their businesses. I've been having more of these conversations lately. Almost invariably, the owners are losing money. More important, they are out of cash. They aren't sure if they should ride on or hang up their spurs.

In the sidebar to this story are 10 questions that will help you decide if it makes sense to stay in business. You don't need to have the "right" answers to all these questions to forge ahead. But some "wrong" answers should give you pause.

At what point do you quit? In an often misquoted 1941 speech, Winston Churchill said, "Never, never, in nothing great or small, large or petty, never give in except to convictions of honor and good sense."

The operative words here are "good sense." Business isn't easy, and there are times when quitting is the smart thing to do - even if it's simply to get out before you do any more damage. That's not failure, by the way. The only true failure is never having tried.

Back to Dusenberry. She seemed like an open and honest person who'd reached her limit and was ready to rethink everything. I know that feeling of being alone, and I thought maybe I could help. Debbie and I started exchanging e-mails.

It became increasingly obvious to me that she was nowhere near ready to quit. She had a flawed business model, but the clues to the problem - and a possible resolution - were right there in plain sight. More on that next month.

Jay Goltz employs 110 people at Artists Frame Service, Chicago Art Source and Jayson Home & Garden, all based in Chicago. He is the author of The Street-Smart Entrepreneur (Addicus Books).