Kevin O'Leary Says if Your Business Isn't Making Money After This Long, It's Time to Pull the Plug

Starting a small business can be a daunting prospect -- especially if you keep reading story after story about ventures that have failed. That's why it's important to maintain a positive attitude when your business is in its early stages.

It's also important to have realistic expectations when it comes to your business. You might start out with very little money in your business bank account, and your balance could take a long time to climb. In fact, it's not uncommon for small businesses to go a year or more without generating a profit.

But at some point, you may need to consider closing your business if you're not managing to make any money. And if you're wondering when that point should arrive, Shark Tank's Kevin O'Leary has an answer.

Prepare to pull the plug after 36 months

O'Leary has invested in his share of successful businesses, and he also knows that it's not unusual for a small business to fail. That's why he says it's important to do an assessment after 36 months.

If, by the three-year mark, you aren't making any money, and there's no clear path to making money, then what you have is a hobby, he insists -- not a business. And so in that case, it's generally time to let that business go, especially if you're spending money to keep it afloat.

That said, if you can identify major flaws in your business model that may have been preventing you from making money, or if you can find new ways to generate revenue, then those are things worth pursuing before folding your business. Maybe you've been hampering your efforts to make money by refusing to open an online store. It could pay to give that a try before shuttering your business completely.

Similarly, perhaps you've just discovered a great way to cut costs and deliver your product at a lower price point that appeals to more consumers while allowing you to make money. If so, give that a go before calling it quits.

But if, despite your best efforts, a profit seems totally out of reach, then it may be time to bring your venture to an end. This is an especially wise thing to do if you're at the point where you're dipping into your personal savings just to keep your business going.

You can always try again

If your business isn't making money after three years, O'Leary is pretty adamant that it's time to shut it down. But that doesn't mean your career as a small business owner has to come to an end.

There may be another idea you can pursue, or another small business you can buy into and help run. So don't assume that you're doomed to failure just because one company of yours didn't pan out. Instead, think about ways to hit the ground running with other ideas of yours, or how you might be able to leverage your experience and skills to help another small business become gloriously successful.