In the ever-evolving beauty industry, we witness brands and retailers closing their doors with increasing frequency. Operating in such a competitive market is a challenge on its own, but when combined with a global pandemic, inflation, soaring interest rates, unexpected legal issues, and rapidly evolving technology, the reasons behind these closures become apparent.
The following narrative is a candid account from a female founder who, over the course of six years, navigated numerous hurdles before making the tough decision to shutter her beauty brand. While the details of her brand remain confidential to protect her identity, her story sheds light on critical aspects of entrepreneurship, including hope, identity, debt, and knowing when to move on.
What Caused Your Brand’s Closure?
The founder’s journey was marked by highs and lows, with profitability remaining elusive. As summer approached, the brand was experiencing growth but was still not in the black. To achieve this, raising more capital was necessary. However, the founder, feeling that she had dedicated enough time and effort to the venture, was reluctant to undertake another fundraising campaign. The challenging fundraising environment also played a role in her decision. Customer acquisition cost became a significant obstacle, which saw fluctuation over time. Initially at $70, they managed to reduce it to $45. Yet, external factors, including the Apple iOS14 update and turbulence in the tech industry, caused the acquisition cost to surge to $80, eventually leading to the brand’s closure.
The Emotional Toll of Closing a Business
The founder discusses the emotional toll of managing the closure, explaining that it requires a dual existence. While facing the harsh reality of diminishing cash reserves and the possibility of the business’s non-existence, the founder was also putting everything on the line to keep it afloat. This dual life, where one must portray a positive façade while making difficult decisions behind the scenes, takes a psychological toll.
Knowing When to Close
The founder highlights a quote from Harvard Business School Professor Christina Wallace: “A startup knows it’s time to shut down when they’re out of hope and money.” When hope remains, even without resources, entrepreneurs will find a way to continue. When there are resources but no hope, they go into survival mode. But when both hope and resources are exhausted, it’s time to consider closure.
A Valuable Lesson for Founders
Reflecting on her journey, the founder acknowledges the challenges in standing out in today’s beauty market. With the ease of starting a direct-to-consumer brand, the market has become saturated, making it difficult for customers to form authentic connections with brands.
Dealing with Personal Debt
The founder reveals that she accrued personal debt due to the business. In the final months, the personal risk she took on in the quest to save the brand was challenging. She reframed the debt as the price of her entrepreneurial education, focusing on gratitude for the experiences and people she encountered.
The Brand’s Fate
The brand remains for sale, with brand equity established over the years. Preliminary discussions have taken place with potential acquirers who may give the brand a new lease on life.
Looking Back
When asked if she would change anything in hindsight, the founder stresses the importance of trusting her instincts more. Even with experienced advisors, their experiences may not always align perfectly with one’s own.
Closing a business is undoubtedly a challenging journey, but the lessons learned can pave the way for new opportunities and personal growth.
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