What to Do When Your Business Fails Miserably
What will you do if your business crashes and burns?
Few successful entrepreneurs make it big on their first business venture. In fact, 830 of the world's 960 self-made billionaires made their money from multiple businesses—and they're not immune to having a business fail.
Most of them weathered a few, sometimes miserable, failures before they made their first million dollars. Their eventual success is due to a proactive choice to never accept failure.
The belief that any failure is merely a learning opportunity, and that these lessons would shape how they'd do business the next time around.
I'm no stranger to business failure, either. To an experienced outside observer, the trajectory of my first business was like watching a train wreck in slow motion.
I built a product based on untested assumptions, failed to validate the market appeal, didn't start working on a distribution & sales plan until I had already produced thousands of units, and seriously misjudged the price point consumers would be willing to pay.
All in all, I'd end up losing $6,537 after liquidating my excess inventory at deep discounts. However, the failure of my first business taught me some very impactful lessons that would go on to shape the person I'd become. It also made very clear to me, the decisions I'd have to make in the event of another business failure one day.
When your business fails, you're likely bringing with you some less than ideal financial conditions, potentially damaged relationships with friends or co-founders, and a very strong shake to your personal confidence. It's heavy.
The bottom line is that when your business is failing, it's now time to make some tough decisions.
Here are the two main decisions you need to consciously make after experiencing business failure.
1. Do you immediately try again?
What'd you learn from your recent business failure? Does it make sense to immediately pick back up and try again with a fresh outlook and a slight change in business model?
The first step before making any concrete decisions about your next course of action is to decompress, analyze your failure and determine the biggest contributors to why things went wrong.
- Were you out of touch with your customers?
- Was your product or service truly unique in the marketplace?
- Did you effectively communicate your value propositions?
These are just a few of the most common reasons 80% of businesses fail in their first 18 months.
After my first painful business failure, I spent dozens of difficult hours analyzing where exactly I went wrong and figuring out which decisions I could've made differently along the road to that failure. While I had already decided that I wasn't going to pursue a similar business (ever again), I did all of this analysis with the goal of quickly internalizing the lessons that might be able to help me do better with my next business venture.
Don't dwell on your past failures, but if you don't pause and thoughtfully collect insights, you're bound to make the same mistakes over again.
2. Do you focus on getting a full-time day job?
Before immediately jumping into another costly business venture, you need to go through a serious self-evaluation and determine whether or not that's a reasonable (and responsible) decision.
If you have a family that depends on your income, or a large amount of outstanding debt from your last venture, taking a steady full-time job with your new set of broad experience may be the best course of action for the immediate future.
It doesn't have to be forever; plenty of successful entrepreneurs have had pitstops working for someone else in between self-employment, which is exactly what I did after my first business failure. Rebuilding my savings for two years, getting paid to gain more experience, and establish relationships with people who'd later go on to become mentors, advisors and clients, all paid off greatly.
If your business fails, don't allow it to diminish your self-confidence or wipe out your lofty ambitions. Take care of your responsibilities, learn from your mistakes, spend a little time decompressing, and start looking for your next business opportunity. Make it count.