December 31, 2016
Depending upon the research you subscribe to, startups in all industries have either an average of a 50% failure rate within the first five years, or, as Neil Patel stated in a Forbes article in 2015, 90% will fail. Perhaps the actual truth is somewhere in between. Whichever statistics you accept, the failure rate is high in the startup world, of that there is no question. It’s hard to see a dream die, but, as Patel also points out, that failure can become a catalyst, as long as you learn from it.
What Patel Learned
First off, He wasn’t solving a unique problem. He patterned his business after two other major job boards that were already million-dollar businesses. In trying to be different, he ultimately added all sorts of complex features – these only served to confuse visitors. Plus, he didn’t really have a marketing plan, he wasn’t “scrappy” enough, and he didn’t update the site as the Internet and technology evolved.
He closed his company after two years. Obviously, Patel learned from his mistakes. Today, he is the cofounder of two hugely successful companies – Crazy Egg and Hello Bar – and is a consultant and frequent speaker all over the world.
What Founders Who Have Failed Say
It is common practice for founder failures to write a post-mortem of their experience. Sometimes, these are pretty honest; sometimes, they are methods of finding blame. Most often, however, the reasons they list include no market for their product or service, running out of cash, bad timing, the wrong team, and strong competition.
Recognizing a failure is difficult, and it’s the reason why many founders stay in denial longer than they should. They tend to paint a better picture for the outside world; they hang on because they’re emotionally attached to their idea; they believe that if they can just generate a bit more money, they will make it. Accepting a failure, as hard as it may be, is the first step in coping.
Jaime Lopez, founder of startup Enso Digital, decided to interview successful entrepreneurs to discover how to avoid failure. One of his interviewees was Dr. Michel Fattouche, successful founder of WiLAN. When asked what is the biggest waste of time for entrepreneurs, Dr. Fattouche was quite clear:
“In my opinion, the biggest waste of time is to keep going even after failing. However, it is not easy sometimes to recognize failure. You need someone you can trust for a second opinion. As an entrepreneur, you will have a limited number of chances in your lifetime to success, as long as you can ;quickly identify failure and move on to the next best thing. If you are going to fail, hopefully you can fail fast.”
Coping Beyond the Failure
Holding a post mortem is an important activity. It allows you to identify the mistakes you made. Beyond that, there are a few more things to keep in mind, so that your next venture has a greater chance of success:
- If you plan to offer a product or service that is not totally unique, make certain that yours offers something that the others do not. It can even be something as simple as better pricing.
- Consider a cofounder. Sometimes, the support and collaboration is the difference between success and failure.
- Develop your marketing plan before you launch. Discuss it with other successful entrepreneurs – they have experience and can provide good suggestions.
- If you go at this new business full-time (and you should), be certain that you have a cash reserve to live for at least six months. Many entrepreneurs have failed because they ran out of personal funds and had to take a job.
Above all, know the difference between working in your business and working on your business. As a new entrepreneur, you will have to play lots of roles. Just be certain that you allocate time every day to work on the business and its growth.
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