We’ve all heard some variation of the quip that overnight success actually involves years of striving, with presumably several failed efforts and false starts along the way. But when entrepreneurs experience failure, whether it’s their first encounter with it or an especially spectacular failure, it can be a major blow financially as well as emotionally. Here are my thoughts on how to recover from a significant business setback.
Following these six key steps can mean the difference between a failure that becomes an inflection point on the way to bigger and better things and one that leads to the end of the (startup) road.
1) There is no disgrace in honest failure…—Henry Ford
Be forthright about what happened. Instead of avoiding or downplaying your failure in the hopes that others, potential new business partners, investors, or acquaintances won’t find out about it, explain what happened and own up to your role in it. As well as having the advantage of framing the discussion, you’ll gain respect for tackling it in a straightforward way.
2) You can’t connect the dots looking forward; you can only connect them looking backwards.—Steve Jobs
Conduct a post-mortem. What chain of events led to the failure? Was your business buffeted by a shock beyond your anticipation and ability to control? Think 9/11 or the sudden bankruptcy of a major client. Was your startup the victim of a competitor’s sucker punch, or did you run aground through a series of financial or strategic missteps that ultimately led to a death spiral? Be sure you thoroughly understand the factors that led to this unfortunate outcome so that you can figure out ways to minimize or even avoid the chances of encountering them in the same way again. Also make sure you can distill your findings into a concise and insightful explanation so that you can address the inevitable questions.
3) You can be discouraged by failure, or you can learn from it.—Thomas J.Watson
Use the experience as a learning opportunity. Almost no one succeeds at something right out of the gate. Before Howard Schultz took the world by storm with Starbuck’s, his pitch to the original owners to expand the company from three stores into a national retailer was rebuffed. Everyone knows what happened next. Trial and error can be exceptional learning strategies as long as each misstep pushes you further along. Taking the time to reflect on what you learned, rather than believing that one failure defines you will put you in a better position to win next time.
4) When we are no longer able to change a situation, we are challenged to change ourselves.—Victor Frankl
Determine what you’ll do differently next time. A setback is an excellent opportunity to regroup and consider which tactics and behaviors worked well and which didn’t. While you might not be able to salvage your business, you have gained invaluable insights to bring to your next venture. Steve Jobs credits his enormous success at Apple to his forced exit from the company in 1985. In his words, the firing freed him up to learn and try other projects, unleashing creativity that eventually made him a much bigger success in business and in his personal life.
5) To be prepared is half the victory.—Miguel de Cervantes
Some failures stem from a lack of preparation. Did you overlook the importance of having a backup plan in place in case you lost a key employee or did investor funding prove to be significantly less than you needed or take longer to raise than you planned? Be better prepared next time by thinking through “what if” scenarios and developing detailed contingency plans for your base case, an optimistic scenario, and a worst case. While you’re at it, seek out advice and coaching from experts in all of the areas where you and/or your plan were deficient before starting over.
6) Failure is only an opportunity to begin again more intelligently.—Albert Einstein
Once you’ve carried out all of these steps, the only thing left to do is move on. Continuing to dwell on your disappointment won’t bring you closer to your ultimate goals. Depending on the circumstances, you might need to take additional actions to get yourself back on course, like rebuilding your personal finances, resolving legal disputes, or liquidating inventory. Whatever the case, you’ll be better equipped to meet those challenges using these strategies.
Have you experienced a business failure? How did you recover? Share your strategies in the comments section below | Images via ShutterStock