According to research by the University of the Western Cape, between 70% and 80% of small businesses in South Africa fail within the first five years. And that’s for real, established businesses. The failure rate for business ideas – before they even get off the ground – is likely much higher.
That’s why knowing whether your idea has genuine potential, and recognising the point at which it doesn’t, is critical for any aspiring entrepreneur. Continuing to invest time, money, and energy into an idea that isn’t viable can be costly, both financially and emotionally.
That said, not every business idea is destined for failure. Here are five ways to determine whether an idea has the potential to succeed and when it’s time to let go.
- Test market demand early
One of the most common reasons businesses fail is simply because there isn’t enough demand for their product or service. Before investing heavily, test the market. This can be done through surveys, pilot programmes, pre-orders, or small-scale launches. Honest feedback from potential customers can reveal whether your idea meets a genuine need.
If there is little interest or engagement despite your best efforts, it may be a strong signal that the idea isn’t viable in its current form. Recognising this early saves resources and allows you to rework your idea or redirect your energy toward more promising opportunities.
- Evaluate the financial reality
Passion alone doesn’t pay the bills. A sound business idea must also make financial sense. Create detailed projections, including startup costs, operating expenses, cash flow, and potential revenue. Be realistic – not optimistic – in your assumptions.
If your projections show that the business would struggle to reach profitability, or that the risk outweighs the potential reward, it may be time to reconsider. Accepting that the financial model is unsustainable is not a defeat; it’s smart risk management.
- Assess your personal commitment
Running a business is demanding, and entrepreneurship requires sustained energy and focus. Reflect on your level of commitment: do you feel excited and motivated by this idea, or does it drain you? If your enthusiasm consistently falters, it may be a sign that your heart isn’t in it – and that your performance, decision-making, and resilience could be compromised.
Sometimes, walking away from an idea that no longer aligns with your strengths or passions is the best decision you can make for your future ventures.
- Seek objective feedback
When you’re close to an idea, it can be difficult to assess it objectively. Seek guidance from mentors, industry peers, or advisors who can offer honest and constructive feedback. If multiple trusted voices highlight serious concerns or express doubts about the viability of your idea, pay attention.
External perspectives often reveal blind spots that you might have overlooked, helping you make a more informed decision about whether to continue, pivot, or stop.
- Take the emotional toll into account
As we heard during Mental Health Awareness Month, entrepreneurship can be emotionally taxing. Constant anxiety or frustration over your business idea is a warning sign, and going all in on an idea that negatively affects your wellbeing can lead to burnout and impair your ability to make good decisions.
Sometimes, the most courageous choice is to take a step back, preserve your mental health, and apply the lessons learned to a new venture. After all, entrepreneurship is as much about learning from experience as it is about chasing success.
About the Author: Jeremy Lang
