One of the significant characteristics of an entrepreneur, in my opinion, is enthusiasm.

Enthusiasm is often reflected in optimistic forecasts for a product or service that include a hockey stick graph of revenues and profits escalating into the atmosphere.

According to these graphs, the founders enthusiastically expect to have significant market share, high profitability and are on their way to a buyout, merger or IPO within two or three years.

But experience teaches us that new businesses rarely experience hockey stick results. Even the best of companies require seven years or more to get to the point at which a harvest is possible. Of the 300 or so companies that have presented to the Utah Angels, for example, I am unaware of even one that has made its forecast numbers.

But the enthusiasm that drives founders to move quickly to grow their company is usually not offset by a plan of what to do if it doesn't.

Grow, that is.

The fact is, that is what will happen to most companies. Statistics indicate that only three out of 20 new startups still exist intact three years later. This doesn't mean that 17 companies go completely under, just that something happens to run their original plan off track.

So how does an enthusiastic founder know when it is time to call it quits?

Unfortunately, too many entrepreneurs don't quit until they have lost everything - for themselves, their investors and their families, who are often one and the same. They reach a point at which there is no more money and the only alternative is to declare bankruptcy.

But it doesn't have to end this way. There is a solution that should be implemented right after the first round of funding has been accomplished. It is a plan that takes into account time, money and goals or benchmarks reached.

Here are a couple of rules: First, if the company has not reached 75 percent of sales and profit goals by the six-month mark a discussion should be held to see what the officers, board members and advisory members think at that juncture - and to at least consider liquidation.

You never want to be trapped into the "let's give it a little more time and see what happens" deception. Time really is the enemy, and there is no force in the universe that is on your side for a "give it a little more time" help.

And if the company is 50 percent or less below sales and profit goals after six months, chuck the idea and the operation. Return as much as you can to your shareholders and lenders, along with your best explanation of what happened. They will respect that action and will be more open to you the next time you come calling for investment in another idea.

The other rule I use is this: If the negative cash flow (or burn rate) is twice your projection, then liquidate everything by that same six-month mark. Six months really is the time to make major decisions and do honest soul-searching.

Your investors and lenders will be much more sympathetic if you send to them a realistic monthly update with current financials showing how you are doing versus your forecasts. Show all the warts that the company has acquired along with any successes.

Be completely honest - that really is the best policy. If you do that, even when the forecast comparisons are negative, the investors will understand and won't even think about hiring a lawyer because you haven't lived up to your predictions. Most investors have gone through failures themselves and will understand.

In other words, in every company there should be a plan to halt, liquidate and then try again using the experience that comes through making mistakes.