As you probably already know starting a business can be hard work and if it fails, compared with the hours you put in, it can reap poor financial rewards. Despite this once you start-up, even if you have multiple failures, it is completely illogical and perhaps impossible to stop.
If you are a first-time (or second/third time) entrepreneur there are many reasons why your business might fail with the most likely reasons coming down to the following;
Poor business model; the business model is not scalable, not set-up in a way you can employ another person (or this is very difficult) or there just is not enough people willing to pay for your product or service which leads on to my next point..
Poor market research; you did not fully understand the market you are trying to enter, the incumbent or perhaps not obvious competition are just too hard to budge, customers are just interested in something new or there just is no market demand for what you are providing and perhaps where you are providing it is wrong.
Poor effort; you had something that could go somewhere but were too lazy to put in the effort, or effort in the right places, to get it going. Perhaps you were not able to build a team that could do so either.
Rarely will a business fail based entirely on something that happens which is out of your control. Take global economic crisis – sure you might get hammered, may have to let people go, and it will be difficult but a robust business model should be able to survive testing times with the profit margin taking the hit.
I am getting to it.. The above things, although perhaps ‘obvious’ on paper, when it comes to really understanding them – nothing works like real experience. And no learning is better than hard-learned lessons.
So you put in your time and effort into a start-up company and it failed – it cost you money and or lost potential earnings*.
You do not come away empty handed however because, one would hope, during your foray into business you will have learnt quite a lot. Many things you have learnt might not be so obvious to pin down but they will be there and with thought you should be able to find them. Chances are you have probably learnt quite a lot about one or more of the above three points and how to avoid making the same mistake again.
You put in lots of effort and all you got out was learning?
Sounds a bit like School/University? Only you probably learnt more useful stuff. If a start-up cost you say a years wages you must benchmark the value against getting a similar level of education and understanding. It may not really be possible without actually doing it for real but if it was you would probably of had to pay more out for it, and then consider it would probably have taken twice as long to learn the same amount.
The catch; learning is only valuable if you capitalise on it.
If you give up entirely on start-ups, run back to the cosy illusion of a stable job, a pay cheque and the drudgery of a pitiful holiday allowance your start-up really was a failure.
If you keep going, either pivot your failing business to something that will work (chance are at least something you were doing was right), or start-up a new business using those hard-learned lessons you can capitalise on your learning and hopefully prosper’.
When do you stop?
You don’t, you can’t.
You may take a temporary break into the world of employment, but you must keep working on new ideas. Only ideas with better business models, better market research, and better teams because otherwise you will be unable to capitalise on your learning.
Yes it is like a gambling addict, mesmerised by the slot-machine continuously feeding it hoping to try make good on your outlay. The big difference however is that knowledge and experience is something that you cannot lose. Not only that, but the more you do business the better your network becomes, also something of real value.. if you use it.
What can you do?
Pivot – If you have a company with some revenue, or even just the structure, you can modify the model, the market or what you do to make it work.
Start again – but better than the first one. Perhaps best after a couple of months holiday to ponder it over and do some proper market research.
For those feeling beaten up by failure it is also worth pointing out that if your first slightly iffy business model worked to a point where it survived, perhaps in better economic conditions, you may have ended up in a struggling vulnerable business and you wouldn’t be working on that new idea which earns you your retirement.
So, fellow addicts, get back to work – your crack baby needs feeding!