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TURNING ENTREPRENEURIAL FAILURE INTO SUCCESS Posted by Clay Hickson | Jul 16, 2012 | Venture Creation
Many people dream of having their own businesses. The idea of building a business from the start, doing something they love, and on their own terms is certainly appealing. They think about flexible hours, more income, growth and success. But the reality is that building a business can take years of extremely hard work and effort that often ends in failure. According to the Small Business Administration, 69% of startups survive the first two years, and only 50% makes it past the fifth year. Businesses fail because of a variety of factors, which may include bad management; lack of preparedness, knowledge or focus; overestimating the business’s ability to meet demand; poor distribution of resources; lack of funds; etc. For example, a small cupcake shop in England almost went out of business because of a Groupon sale. Need a Cake bakery wanted to increase revenues, and decided to use this service as a way to build awareness. Unfortunately, the move backfired because they were not prepared to satisfy the huge jump in demand. With only eight employees, Rachel Brown, the owner, had to spend a whole year’s profits to bring in more short-term labor and ended up operating at a loss. While this did not put her out of business, it was a costly mistake.
A screen shot of the Need a Cake company’s Groupon deal that proved to be a poor business decision.
Underestimating the popularity of this sale was a great misstep, but it gave Rachel an opportunity to profit from her loss. Not only has she learned to better coordinate marketing and production capabilities, now, thanks to the Groupon deal, she has the contact information of numerous of potential customers for future use. What is important about failure is learning something from the experience and recognizing the opportunities it brings, as Rachel did. Founders of the most successful companies often have faced failure at some point in their careers. Bill Gates founded a business called Traf-O-Data, before hitting the jackpot with Microsoft. Before co-founding Twitter, Evan Williams created Odeo, a podcasting platform which failed after iTunes Store launched its own podcasting platform. All of these entrepreneurs were motivated by their goals and used their failures as learning experiences on the way to creating some of the most successful companies in history.
Image credit: Stuart Miles
So, how can an entrepreneur bounce back from failure?
Take a break – Some people may go through a period of disappointment and discouragement, which is natural. Some may find themselves in a tough financial situation. Taking some time off is necessary to clear thoughts and get reorganized physically, intellectually and financially, especially before undertaking a new venture. Recognize past mistakes – One of the most important things to do after experiencing a failure is analyzing weaknesses. No one can improve unless they identify where they are failing and take the necessary steps to fix the problems. Strengthen skills – Enrolling in business courses may be helpful, especially when it comes to strengthening skills. Entrepreneurs should concentrate on those areas of weakness that may have contributed to the failure. Network – Those who are ready to get back in the entrepreneurial saddle should focus on enhancing relationships with their peers, especially those who have more experience and success. These people can offer valuable advice and some may even be willing to help in the venture, like offering special deals, recommendations, referrals, or serving as a mentor who can help learn from their past mistakes (something I blogged about some time ago). Prepare a plan – Business plans provide entrepreneurs and business owners with a more focused and detailed view of their businesses. In order to be successful, it is necessary to develop a strategic map that will help in reaching goals (another early blog post). Those who succeed do so because they constantly work towards improvement, building off failure. They are able not only to focus on what went wrong but also on all the positive experiences and resources they gained in previous ventures. Dean Kamen, creator of the Segway and other successful biomedical device businesses, once said that his biggest failure was that he had too many failures to talk about, but he never allowed those failures to deter him from the pursuit his goals. Instead, he turned them into positive learning experiences. Failure, when handled the right way, can be an important stepping stone towards great success. After all, failure is the mother of success.
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