6 Steps to Tell Investors You Are Shutting Down
How to Tell Investors You Are Shutting Down
1. Consider your options
If you are reading this article, then shutting down the business is something that you are seriously considering. However, it might not be the only path forward. Maybe there is a way to save the business.
Before closing the doors for good, you should conduct a thorough evaluation of the business’s well-being.
Is there something wrong with the product itself?
Do you need help with marketing?
Can you improve the business model?
Do you simply need more cash to fund operations?
If you are having trouble solving any of these problems, then it’s time to bring in outside help. You can hire a consultant. You can also seek advice from your investors, especially if some of them are successful entrepreneurs with years of experience.
However, if you think shutting down is your only option available, then keep reading. I’ll tell you what to do.
2. Write everything down
You should create a written document about the shutdown before speaking with investors. They will have lots of questions. Be proactive by anticipating and answering some of these questions. Before writing anything, you should remind yourself to be transparent and professional.
First, explain why the business is shutting down. Don’t sugarcoat anything. Be specific by using line items from financial statements. If applicable, you can mention external factors, such as the competitive landscape and changes in consumer preferences.
Next, create a detailed timeline.
When will the business close its doors for good?
In the meantime, how will you liquidate assets and pay liabilities?
Have you already communicated these plans with employees?
Finally, address the investors. Thank them for their time and resources. In a situation like this, investors want to know whether they will get any of their money back. So, be sure to answer this question.
Professional investors understand risk very well. After all, startups have a high failure rate.¹ Not every investment will be successful. Maybe you will do well with your next business idea.
Therefore, you can conclude by leaving your contact information. Hopefully one day, everyone can work together again.
3. Schedule a meeting
You must speak with your investors about the shutdown. It’s a show of respect. No one likes to find out about these things through email.
Ideally, you should schedule an in-person meeting. However, you can also use video conferencing software if everyone cannot be in the same room together because of scheduling conflicts.
During the meeting, you can go through the written statement. Make sure everyone has a copy. Delivering the bad news will be painful, but simple since everything is already written down.
After speaking, you should give your investors some time to ask questions.
Above all, be empathetic. It’s a disappointing time for everyone. Be mindful of people’s feelings.
4. Keep lines of communication open after the meeting
Investors might still have questions after the meeting. They might think of something that they didn’t think about before.
Therefore, in this tumultuous time, be reachable. Keep your mobile phone with you at all times and check your email regularly. Try to calm everyone’s nerves by responding promptly to calls and emails.
5. Continue to give progress updates
Now that the investors know what lies ahead, it’s time to execute the shutdown process. Wind down business operations by selling excess inventory, paying final bills, and filing the necessary legal paperwork.²
You should still give updates to your investors during this time. Send them simple emails if long meetings are no longer necessary. The investors might be able to give advice and help with the shutdown process if they have experience winding down a business.
6. Send one final message
When everything is finished, you should send one final message to the investors. Once again, thank them for their support. Make sure they have your contact information in case they need anything. Finally, end the message optimistically and look forward to the future.
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