In my last post, I wrote about how I was able to sell my first business — how building a brand, a customer base, and a real competitive advantage helped me build a small business with value. This one is about the other side. Business failure, and how failing was the best education of my life.
After selling my first business, I worked for another company for two years before co-founding a technology start-up in the late 90s.
“Co-founder” meant being an employee, partner, board member, and investor. The problem was I didn’t exactly have the amount needed to invest, so I did what many optimistic entrepreneurs do: took a second mortgage on my house. Nearly twenty years later, my mortgage still reflects the amazing learning experience I am now recounting to you.
Our fledgling tech start-up built a progressive platform for middle-market companies to migrate business processes to the web. The platform included many features that are standard today, but which were ground-breaking in the 90s: data-driven content, personalization and recommendations, site themes, an email builder, friendly end-user web administration, eCommerce, eLearning, rewards, and a configurator for building custom products online — among many others.
The beginning of the end.
After two years of development, we went to market in 2001 — just as the dot-com bubble was about to burst and the tragedy of 9/11 was forthcoming. Investors realized it might be a good idea if tech companies had a viable business plan or some path to eventual profitability. The country and our company were facing a world of hurt on various levels.
We succeeded in pitching some very reputable companies, but the answers were the same: “Why would we want to do that?” We were rounding third base before most people got to first. It was early days; most companies didn’t even have a website, and if they did, it was a first-generation site that was static, slow, and ineffective. We were trying to sell a rocket to people who wanted to fly a kite.
A cash call was made to the board to keep payroll going toward the end. I had $5,000 cash to my name from a web development side project — which at that time might as well have been a million dollars. I knew it was futile but would at least help contribute to maybe a couple rounds of payroll. We closed the doors shortly thereafter and left close to one million dollars in code sitting on the shelf. I lost a pittance compared to my partners.
Ironically, if we had started a year or two earlier, we would have attracted significant venture capital investment. In those days, countless tech companies without any business plan or strategy were flush with VC money because everyone was certain that the big payday — a viable market — was just around the corner.
We were too late for investors and too early to market. Business failure doesn’t come easy, and there is no running away from it.
We were trying to sell a rocket to people who wanted to fly a kite.Terry Sullivan
Things business failure taught me.
I went to graduate school three years later. It was there that it dawned on me: I had already acquired an amazing education through failing. It certainly was not the result I wanted, but it was probably more valuable than any of my successes — or a master’s degree (and I think those are very valuable).
The freaky thing about business failure is that many of us are taught from an early age to fear it, loathe it, and be intimidated by it. I lost a lot in that effort — but learned so many things that I did not learn after successfully selling my first business:
- Succeeding is easier than failing — until you have failed hard, you might not really realize this. Learning the hard way is a keen educator.
- Market research and planning are essential — no matter how great your product or service is, if there is no market for it, there is no business.
- Hard work doesn’t always pay off — we’re taught the opposite, but it’s a polite lie to motivate us. You can work like a dog and fail miserably, but it really does build character and all that other stuff our grandparents told us.
- Great products fail often — we built so much into the product that it was like wearing a tux to a square dance. Don’t delude yourself into thinking that your audience will be as enamored with your product as you are — or that you can necessarily create a market that doesn’t exist.
- The sense of urgency is different between owners and employees — when payroll and answering to a board is on you, your sense of urgency is not the same as your employees’, no matter what they say.
- Failure can be liberating — it can embolden you to try new and different things. When you fall off the bike and realize your elbow isn’t broken, you get back on and try again.
- Humility is never a bad thing — failure or losing reminds us we can’t always win, and that maybe we’re not as wonderful as we may think we are.
- The beauty of experience — nobody can take away your experiences. I continually talk about and reflect on this one way more than the successes.
It certainly was not the result I wanted, but was probably more valuable than any of my successes — or a master’s degree.Terry Sullivan
Business failure is about perspective.
Nobody wants to fail or lose. Most people don’t consciously do silly things or make mistakes to achieve the opposite of success. Losers don’t usually get a trophy and failures don’t get accolades — even if they tried their hardest to hit the ball or pass the algebra final.
But the truth is that effort does count. In the real world, you do receive partial credit. Win or lose, it is how you play the game. Learning enables us to live within our own skin when we fail, which begets confidence, self-respect, and integrity.
The journey to success or failure is often riddled with the same forks in the road, the same obstacles, and the same challenges.
There is always an element of winning in losing — if we choose to learn from the experience.
If you’ve got your own war stories to share — or challenges you’re working through — feel free to reach out at [email protected].