Starting three
companies -- two of which didn't take off the way I envisioned -- taught me
that while entrepreneurs should dream big, it’s essential that we also plan for failure.
More than 90 percent of start-ups fail.
And recognizing this
right off the bat will prepare you intellectually, emotionally and financially,
if your venture doesn't succeed.
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Planning for failure doesn't make you negative or paranoid. It makes you smart. First, there's a huge
difference between preparing for failure and thinking you’re going to fail. The
latter is highly discouraging and curtails growth. The former, on the other
hand, is about being practical and thoughtful about all of the possibilities
that may occur. In some ways, it can even encourage entrepreneurs to progress
because being prepared quells fear and prods you to keep going.
I always plan for
worst-case scenarios, considering how they may affect my team, their lives and
how to mitigate them. For example, I need to think ahead: What if we were to
lose one of our largest clients? How would that impact our cash flow, company
morale and what would my investors think of the company’s outlook? It’s
difficult to think of these scenarios, but I believe it’s necessary to plan for
it. In some cases, planning for failure helps me anticipate challenges so I can
prevent them from happening.
Additionally, being
honest with yourself and thinking about potential failure enables you to
identify mistakes that you’re making in your business, so you can correct them
more quickly along the way.
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It helps you be more objective. Starting and running a business can be a very
emotional experience. Your company is your "baby,” after all, and it’s
something that you’ve poured a lot of heart and passion into. Forcing yourself
to be prepared for the worst can help balance that out. How? Planning for
failure or thinking of an exit strategy pushes you to be less “clingy” with
your company. It forces you to look at the facts and unpleasant possibilities
(no matter how difficult), thereby enabling you to be more analytical and
objective.
Being a bit
disassociated from your company also gives you more perspective because it
allows you to look at it from the vantage point of your investors or customers.
This, in turn, helps you generate ideas or even catch errors that you may have
missed being too close to your business.
Toward the end of my
first company's existence, my co-founder Andrew and I forced ourselves to evaluate the
business from a customer’s perspective, and we learned that the solutions we
were building simply did not solve a problem that was big enough. We set our
emotions aside and closed the business because when looking at the facts, we
did not have a business. We would have not had the courage to face our failure
so quickly if we didn't plan for it.
Recognizing that you might fail keeps you on your toes. Acknowledging the possibility of failure
prevents you from being complacent. Knowing that at any point your venture
could take a wrong turn keeps you from resting on your laurels, which means you
strive harder and don’t let success lead to hubris.
Never became too
self-satisfied. Remember it takes years to build a company and one simple
mistake to bring it all back to nothing. Never lose sight of that. It's
important to stay focused and hungry.
Planning for failure makes it easier to move on. Preparation can help soften the blow in the
event that your company hits the rocks. Looking back, I don’t think I would
have been able to move on quickly from my unsuccessful ventures if I hadn't prepared for the possibility of failure.
When my first start-up didn't take off, Andrew and I were prepared to deal with the circumstances. We
had planned for it mentally, emotionally and financially, and decided we weren't going to take it personally, which was why it only took us two weeks to
recharge and start our next venture.
No one wants to face the dreaded “F” word, but
even the most successful entrepreneurs experience their share. It’s simply part
of the game. And, who knows? It could even serve as the foundation for
something far bigger and better.
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