For many business owners, failures are not the end of the road. Instead, they tend to be inflection points for a professional life dedicated to forging one’s own way.
Having spent a number of years building a business catering to a loyal network of independent business owners, one client was ready to expand its menu of services. Armed with research and a plan, he rolled it out to the network and sat back, confident that it would quickly catch on.
Instead of snapping up the new services, however, his clients largely shrugged them off, and the founder was left with a struggling initiative.
After giving it some time, the company founder determined that it just wasn’t going to work. So he pulled the plug on the new line and focused his energies elsewhere for the company.
“You either have to mold your model to the market, move your model or redirect your strategy, and sometimes that means admitting that your idea isn’t great,” says the business owner. “I think it’s important to recognize that everyone fails, and you can’t get caught up in the emotion of failure.”
Such is the way of life for entrepreneurs who seem to seek out risk and flirt with business failure on a regular basis as part of a constant search for success. For this particular client, that meant finding new and different ways to fulfill the company’s vision and mission of supporting its network of members, which has expanded dramatically across the U.S.
It may seem counterintuitive, but our business owner clients who have experienced failure view it as an opportunity. They figure out what went wrong and set out to creatively try again, doing things a different way.
Like It or Not, Business Failures Happen
According to the U.S. Small Business Administration, about 50 percent of businesses fail within five years of startup and about two-thirds don’t make it 10 years. The reasons range from poor accounting, misreading the marketplace, an inability to meet demand, and ineffective marketing.
Another client faced a crisis point in the sixth year of running his 29-year-old firm. At that time, a customer representing 60 percent of the company’s revenues called to say he was ending his contract in seven days. This client learned through a painful experience a few years earlier — in which an employee was killed — that the best way to confront a problem is face it head on. So he maintained contact with the customer.
When the contract ended, he carefully managed the resulting layoffs, retaining his most valuable employees. The market eventually recovered, the large customer returned alongside a number of new customers, and the firm grew impressively.
“We didn’t get upset when they did what they had to do, and we kept taking them to lunch, just as we had been doing when they were a customer,” says the business owner. “You don’t hide behind an email or a phone when times get tough. You need to maintain eye-to-eye contact when it’s a serious issue.”
Rolling Through Business Challenges
By definition, business failure is a rocky road. Strained finances and stressed personal relationships can affect day-to-day living.
Both clients stressed that keeping a tight rein on personal finances helped buffer their households during fits and starts. To further ease potential challenges on the financial front, a “kitchen table” meeting using a goals-based approach can broaden the focus of a business owner and his or her spouse. The discussion highlights personal goals and spending targets related to those goals.
The analysis works backward from that point, producing a detailed report on the alignment between the business and personal goals. It incorporates non-business assets, which may be invested much more conservatively than if a business venture wasn’t part of the equation.
“For all of the ups and downs, business ownership can prove quite rewarding.”
Should the business begin turning south, the big picture analysis helps set the framework for the ensuing discussion.
With regard to the potential emotional issues, many family matters can be eased with a robust succession plan that allows for a variety of scenarios:
- Will children inherit the business?
- What if one wants to cash out immediately?
- Will ownership transfer to employees?
- What are the management rights?
- How much is the owner taking out of the business?
- How much is being invested back into the business?
- What non-economic issues need to be addressed?
Business Failures and Successes: A Worthwhile Journey for Many
For all of the ups and downs, business ownership can prove quite rewarding.
We’ve found that there’s something internal that pushes owners to want to make their businesses bigger and better. It’s really their lifeblood; the business is their baby, and frequently their family is involved. Giving up in failure would be like giving up on themselves.