Chances are, in the past few years, most of us know (or even own) businesses that have failed or are on the brink of failure. After all, it’s not easy to survive an economic downturn the likes of which we haven’t seen in 80 years. I’m sure there are thousands of business owners who still aren’t sure they’re going to make it to the end of the month. While I’m a big believer in persevering and fighting the odds, sometimes it’s smarter to go back to the drawing board and start over. In other words, the key to long-term business success might just be your ability to fail.
Business failure is often highly underrated. Entrepreneurs in particular can be paralyzed by the fear of failure, and not just at startup. This fear can pop up at any point in your business’s growth cycle. Too often we’re so obsessed with the stigma of being branded a “failure” that we’re too afraid to take the steps necessary to achieve success.
Failure can, in fact, be one of the best teachers we could ever have. It teaches us what to do — and what not to do — the next time, and the times after that. Realize, though, that truly being a failure and failing are not the same thing. A true failure is more likely to close shop, jump ship, and walk away from entrepreneurship. Someone who has failed takes inventory of his or her mistakes, tries to figure out why they occurred, and either corrects them as soon as they can or starts anew, hopefully a lot wiser.
Smart entrepreneurs take the time to analyze their mistakes so they don’t repeat them. That may be harder than it sounds, since you have to separate your ego and emotions from the fact that your business is in trouble. You also need the ability to honestly assess the situation and accept responsibility for what’s going on. The mistakes that got you into this dire situation may or may not have originated with you, but you’re the boss and the buck starts and stops with you.
So what’s the best way to deal with failure, whether impending or existing? Try this simple three-step process. It could help you learn from the failure of your business, or might keep you from failing completely. Even if your business is in good shape right now, it couldn’t hurt to go through the process:
Step One: Observe. Look around your company. What’s going right? What’s going wrong? If you’ve already shut down, what went wrong? Could you have prevented it? How? Try to identify as many mistakes as you can. If you are having a hard time understanding what happened, ask people who are familiar with your business such as your accountant, lawyer, or even your banker or a close colleague. Are you a member of your trade association? Someone there or fellow members might offer some advice. Even a trusted employee can give you another perspective.
Step Two: Adjust. Once you’ve identified the problems, quickly figure out a way to correct them. Again, be honest. Ask yourself, “What can I learn from this?” And then come up with a plan to apply what you’ve learned. If you’re still in business, this may be the best time to make that go/no go decision. Can you save your company? And perhaps the hardest question: Is it worth saving?
Step Three: Move On. This is the most important step in the process and perhaps the hardest. If you’re still in business, your job is to start applying what you’ve learned. And vow to stay alert and on top on things so nothing can sneak up on you again. If you had to dissolve your company, don’t dwell on the past. Beating yourself up about what happened doesn’t serve any purpose. Instead, think about what’s next. Will you start a similar business, now armed with the crucial lessons you learned from failing? Or can you apply what you’ve discovered to a new business venture?
This is a great time for all entrepreneurs, no matter what fiscal shape your companies are in, to identify the opportunities. As I said in last week’s column, if you start prepping now, you’ll be better poised to take advantage of the economic recovery that’s sure to come.
Failure is an entrepreneur’s inevitable companion. Even the best and most successful business owners experience failure to some degree. It happened to Bill Gates and Steve Jobs and it will happen to you. I’m not saying failing is easy and painless. It’s not; it’s hard and it sometimes hurts. But it also teaches, motivates, and challenges. So when you’re struggling, try to remember the words of Malcolm Forbes: “Failure is success if we learn from it.”
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