How To Deal With Business Failure
Your worst professional nightmare has happened. You swung for the fences, and the business dream failed. But you know what? You’re going to be okay. Not only that, but you have finally made it to the trial-by-fire phase that most, if not all, successful entrepreneurs endure at least once in their lives.
It’s tough. I know the heartache firsthand (more on my own journey through very public business failure is coming).
But remember, this is a normal, acceptable part of the entrepreneurial process. So stop second-guessing, heaping blame and guilt on yourself, and wondering if you should run away to another country and assume a new name. There are concrete actions to take here and ideas to consider that will get you through this phase and into the next.
Don’t Panic After Failure!
Nobody likes failure and failing alone and you aren’t in that position right now. You’ve actually joined a club that no one chooses to be in, but whose membership is filled with legends!
“I failed very consistently for many, many years. It’s sort of the bedrock of my life process.”
– D.B. Weiss, co-creator and writer, Game of Thrones, as told to David Eagleman on the Netflix project The Creative Brain.
Walt Disney was fired by a newspaper editor for having no good ideas and no imagination. (Seriously.) Later, he had to file bankruptcy with his first business endeavor. Many believe that, had it not been for his brother Roy handling the business aspects of Mr. Disney’s businesses, Mr. Disney would have probably been a failure. There’s a thought to consider here. Did you just need a Roy?
Or how about Steve Jobs? The man was fired from Apple in 1985—forced out by the board and then-CEO John Scully. Further, this move was applauded by the business sector. They’d labeled Mr. Jobs as too reckless to run a business. He wouldn’t come back as CEO until Apple merged with NEXT in 1997. Twelve years later! Jobs did not sit on his laurels in those 12 years, nursing a broken entrepreneurial heart, and you don’t have to, either. Instead, he began building something new and that eventually became the backbone of Apple’s comeback.
Or think on Oprah Winfrey. She went to Baltimore to be a news anchor. She was demoted rather quickly because her supervisors found she was getting too emotional and connected to interview subjects (e.g., taking blankets back to victims). However, she’s been very candid about how this set her up for the thing that she would ultimately become known for: a talk show host. The station had to finish out her contract, so they made her the host of a show. Not incidentally, that station is also where she met the woman who has been her best friend ever since, Gayle King.
Or how about Henry Ford? He spent every dollar from his first round of investors and didn’t create a single car. Then he managed to make a car and start a second motor company, that then failed. It wasn’t until the lucky third try when he began to find success.
There are many entrepreneurs who have had to deal with business failures in their careers—so many that it’s now an accepted rite of passage into the successful entrepreneurs club. If you haven’t failed by the time you succeed, then your instant success might even meet with skepticism and suspicion at this point.
How do I know?
In August 2018, I was faced with no option other than to resign from the nonprofit I’d helped to found six years prior. Several donors, due to circumstances in their personal lives, couldn’t make good on their pledges and the organization couldn’t weather the financial burden. I’d been working without pay for several months. Every dime, professional relationship, ounce of credit, and business resource I had was in that nonprofit—including the profitable business I’d built for nine years and then donated to it.
I was the main breadwinner in my home and had been for years. My children—9 and 13 at the time, in a posh private school—only knew me as a businesswoman in our affluent community, a professional who put on her heels and went to the office to lead and do.
So yeah, I know how failure feels. The shame. Embarrassment. Guilt. Fear. The second-guessing everything that came before and still is. The sleepless nights spent wondering if maybe, just maybe, you aren’t cut out for this. Maybe you aren’t as smart or savvy or leadership-oriented or whatever as you thought. The panic that raises its head every time another bill hits the inbox or mailbox and the self-flagellation that comes with realizing you held no financial resource back to protect your family from potential failure.
I envisioned people in the business community talking about me, perhaps laughing or saying, “I said that would never make it, didn’t I?”
Our organization had a significant local presence and national relationships. I regularly spoke to high-net-worth individuals and served as keynote at events for others and our organization. The month the organization imploded, the local luxury magazine carried a feature about me lauding me as a visionary who planned to bring hundreds of jobs to the area by building a film and television production studio. The story was picked up by the local business magazine as well. I’d just hosted an all-day conference in which we brought luminaries in the film and television industries to town to teach others how the entertainment business works.
I get it. Failure sucks.
But, eight months and countless hours and words later, I’ve found some concrete action items and perspective. Maybe some of what I’ve learned and lived will help you, too.
You Aren’t Done, Just This Phase Is
Did you crash and burn right out of the gate? Or did you meet with some success and then failure came calling? However you entered this stage of your career, it’s important to remember that YOU are not at an end—only the phase you were in has come to an end. You’ve entered into a new, difficult phase, and you will walk through it, because you can and should.
This phase is part of the accepted life cycle of business ventures and failure.
Businesses encounter failure. Often. Forbes says 9 out of 10 experience failure. Others say the number is smaller, but no expert says that failing is a rarity. It’s simply a part of the lifecycle of creating new business.
Your business failed. It’s normal. No, it isn’t fun or wanted, but it is normal. Failure is normal. It means that you are now a part of the acceptable process required to start a sustainable, lasting business venture.
Think of it as entrepreneurial adulting. Baby, starter entrepreneurs talk about dreams and goals. Mature entrepreneurs have dreams and goals, plus wisdom borne of experience that informs those dreams and goals.
There’s no way to get that wisdom without failing first. Even if you’re one of the small number of entrepreneurs who never had a business go belly up, you’ll most certainly experience your share of flops even within a successful startup. It’s just a part of the process.
Get Still, Get Real
Entering the business failure phase presents you with an opportunity that you likely did not have as a hard-working, burning-both-ends-of-the-wick entrepreneur: the chance to get still and get real.
Stop rolling your eyes. This is really an opportunity.
Do Nothing for 1 Week
When was the last time you sat still and just breathed? Do you even know what your own breath sounds like as it moves through your body? Without breath, there is no life. For the first week after failure, set out to do nothing. If you’re already past the first week, odds are high you’ve been flailing ever since. You’re in reaction mode. Take this day plus the next six. Do nothing.
Don’t make a to do list. Don’t craft apologies or explanations. Don’t start wrapping up loose ends.
You have a whole week now to sit with yourself, and embrace the power inherent in you. You didn’t fail because you’re intrinsically inept. Something within you spurred you to create—a product, a business, a mission. That “something within” gets life and power through your breath.
When stress and tension come (you know, those twins that are ever-present in entrepreneurial adventures), the successful entrepreneur is able to breathe through it. Immature entrepreneurs (who haven’t been through the fiery furnace of failure) hitch up their shoulders, take shallow little breaths, and try to squeak through. Mature entrepreneurs use their fiery furnaces to learn how steady breathing can anchor us and allow us to move through any experience with power and ability.
Take this time to get still and breathe. This opens the door and welcomes in perspective and calm. You’ll need both when it’s time to start again.
Tie Up Loose Ends
How was your dismount? Did the Russian judge give you a 10? When I experienced failure, the last thing I wanted to do was stick the landing aka hang around and tie up loose ends. By that point, I’d been holding on by the skin of my teeth for so long, all I wanted to do was let go and start the free fall.
The week of nothingness will prepare you for what has to be done now. Specifically, it’s time to tie up the loose ends, and do it right.
1. Craft Your Official Announcement
Depending on how things ended with them, you might want to consult your advisory council, board of trustees/directors, or others who were involved in managing or leading the business as you craft this announcement. Ideally, the statement notifies people that the business is now closed (give a date) and provides some sort of reason why. The temptation to either avoid explanation or over-explain will be strong. Now is the time for moderation. Provide a reason, but not a defense.
2. Cancel Contracts With Vendors, Landlords, etc.
Don’t just skip out on your office lease and all those contracts with vendors who were keeping the place clean and well-stocked. Talk with them. If you didn’t negotiate cancellation clauses into those contracts, you will do yourself no good by just falling off the face of the earth. It’s painful and somewhat embarrassing, but go to those vendors and explain that despite your best efforts the company has had to close.
When the organization I led came to its end, there were outstanding contracts and no finances to pay them. If you find yourself in this particular predicament, you have my sympathies. I contacted each vendor with an apology and explanation. I worked with them to find solutions I could provide. Only one got angry and vindictive.
Don’t just ignore vendors and hope they fade away. You’re better than that. Respect, kindness, and humility are not dependent on what’s left in the bank account.
3. Shut Down the Company Website, Social Media Accounts, etc.
If you have the authority to do so, you could go ahead and shut down the company website and social media presences. Depending on your circumstances, though, it might be a good idea to first post the closure announcement you wrote. Leave that up for a specific period of time (one to four weeks), and then take down all the online accounts.
The reason you might leave up the social media for that time period is that people may “hear” about the company closing and wonder if it’s true. They’ll search for the company’s website or social media and it can be helpful for them to find the message you want them to hear.
4. Shut Down the Business With Local, State, and Federal Authorities
This one should not wait. Each day that goes by is another day of liability. File the necessary paperwork with your local, state, and federal authorities to officially close the legal entity.
In my state, Florida, an organization will be rendered inactive if it doesn’t file an annual report. So, why take the time to close the corporation with the state? Why not just wait for the state to do it?
I’m not an attorney and this is not legal advice. There seems to be good common sense, though, in the premise that closing a business on the date that it actually closed (a) doesn’t allow for liabilities to occur after the date of closure, (b) is finishing professionally, and (c) is honest.
Work Through Some Tough Questions after business failure
Now that you’ve reconnected with your own breath and taken the hard steps to officially shut things down, it’s time to get real.
Now, before you start, this is not where you begin beating up on yourself and relegating your entrepreneurial spirit to the trash heap. Just get real.
To help work through this part, grab a pen and journal and write your responses to the following:
Do you still want to achieve this particular business vision?
Setting aside an idea that’s been tried is not failure, not if there is reason to set it aside. The reasons are your own. It’s okay if you’re just done with this idea. Maybe you learned the market won’t sustain this product or company. Perhaps it’s a good idea, but not your good idea. It’s fine to leave that for someone else to pursue. Consider all that you’ve put into the effort so far. Is the idea worth pursuing again?
If it is, then move on to the next question. If you’ve decided to set this particular idea aside, skip the next question and go to the third question.
Do you still want to go about the achievement of that vision in this way?
If you want to stick with this idea, that’s great. Consider why it didn’t work out this time. What barriers cropped up that you weren’t expecting? What happened that you anticipated, but couldn’t overcome in the moment? Ultimately, ask yourself if there’s a better way to go about accomplishing this vision.
Or maybe this was the right way, but not the right time, or you were surprised by a barrier that cropped up along the way. Did the forces you needed not align properly? Maybe now is the time to try again, or perhaps you should wait. How can you better position yourself to weather surprises the next time you try?
Whether you decide to try this exact same thing again or not, shutting down this business entity is still worthy of serious consideration. By closing the business, you help stop any new liabilities from happening and most importantly create an honest legal record of what happened. Then, when you’re ready to begin again, you can start fresh and stand a better chance of not saddling your new business with the old business’s liabilities.
In considering a new way to skin the cat, you continue to place yourself among the entrepreneurial legends. Human imagination is why we have roads, cars, bridges, cures to disease, buildings, movies, and more. Your mind is powerful. Let it run free.
What is the core motivation for what you were endeavoring?
Why did you start this in the first place? Were you trying to leave your part of the world better than you’d found it? Were you trying to make money? Did you hope for fame? Validation? Really drill down here—what made you spend hours of your precious time on this endeavor?
Is that core motivation still present? Did you lose sight of it in the heat of bringing the dream to fulfillment? How can you ensure that your motivation stays served if/when you pick up the mantle again? For instance, maybe you’re motivated to make the world a better place than you found it. Are you still? Is there a different way to satisfy that motivation than what you were trying? Or, if this is the right way, is there a different method you could try to accomplish it?
Motivations can change. If yours has, that’s okay. If it hasn’t, that’s okay, too. The point here is that you have an opportunity to drill down, identify your motivation, and ensure it’s being met going forward.
If you haven’t visited the idea of motivation before, or want to revisit it in depth, here’s a handy Foundr article on extrinsic and intrinsic motivation to get you going.
Do you need a break?
We entrepreneurs are often gluttons for punishment. We’ll put in a 16-hour workday, come home, and then beat ourselves up for not doing laundry and getting the kiddos’ lunches packed the next day and retuning that phone call before collapsing into an exhausted heap. Entrepreneurs are often hard workers who somehow inherently believe that working ourselves harder will make success more obtainable, despite research showing that sleep begets productivity.
Tim Ferriss, whose book was rejected by 25 publishers before finally being picked up—and yes I’m talking about a book that has sold millions of copies and been on the New York Times and Wall Street Journal bestseller lists (like all of Tim’s five books to date)—made his mark with The 4-Hour Workweek. Does that sound like you need to slave away 16 hours a day, harming your body and relationships in pursuit of your dream’s fulfillment?
But I’m not talking here about taking a break during your work day. No, this is about taking an extended, days-long break from work.
“No,” you think. “I need to be productive, now more than ever.”
Sure. Okay. Want to be productive? Then you need to take a break.
“The impact that taking a vacation has on one’s mental health is profound,” Francine Lederer, a clinical psychologist in Los Angeles told ABC News. “Most people have better life perspective and are more motivated to achieve their goals after a vacation, even if it is a 24-hour timeout.”
What To Do in the Meantime
I told you what I envisioned people in the business community saying about me. Do you have similar fears? Maybe the media covered your startup as much as it did mine (or more!) and now you just know all those people are talking about your failure.
In truth, probably not.
Okay, if you’re Elizabeth Holmes, then yeah, people are talking about you. But you didn’t go from being valued at $9 billion to $0 in 18 months, right? So, chill.
One day, early after my failure, I talked with my real estate broker friend Dave Wallace, who had been helping us find land to build a film and television production facility. This hardworking man had spent hours with the board and me, figuring out the particulars for our $70 million project—and now he would see no monetary gain. I felt awful for wasting his time and said as much. I was scared, too, having no idea what to do next. He let my “woe is me” routine go on for a while. And then I worried aloud about what everybody must be saying.
“Okay, stop it,” he said. “You’re in a tough spot. I get that. I’ve been there, too. Lots of us have. But you know what I learned? Everybody’s got their own stuff to worry about and, unless you are family or an extra special close friend, they unfortunately and most likely, are not going to be spending a lot of time thinking about your situation. They don’t really know what you know, so most of what they know is only speculation. So, you are most likely the only one who is judging and convicting yourself. And if they do have time to talk about it, so what? You know what’s true and you are the one who now has to pick herself up and move on. Nothing they’re saying is going to help with that. Just get it out of your head. It’s the last thing you should think about. Most importantly, remember this one truth: nothing is ever as bad as you think it is and it is never as good as you think it is.”
The words felt harsh, but he was absolutely right. What was happening in my world felt like the only thing happening in our business community, but it wasn’t. And even if it was—even if every person walked into every luncheon that week and started their conversation with, “Did you hear what happened?”—it didn’t matter.
Allow Kindness and Caring Relationships
Now is the time for you to turn to the people who you likely took for granted until now: the kind people. These are the ones who like you and want you around regardless of whether you’re a billionaire or bankrupt. Whether it’s your therapist, a family member, or a good friend, this is the time of your life when you will come into a full understanding of the value of authentic, vulnerable relationship.
Be honest with these people about how you’re feeling and what you’re thinking. This isn’t weakness. It’s easy to hide. Only strength overcomes the desire to withdraw. Use your inner reserve to open your mouth and share.
When a warrior is wounded and bleeding out on the battlefield, the best thing is to let the medic tend the wound. There’s no glory in pushing away the medic and dying, losing your ability to fight another day. Call the medic. Let yourself be tended to so that, one day, you’ll stand up again.
This was a hard one for me to accept. I’m typically the one who is assuring everyone that it’s all going to work out just fine, and then working 18-hour days to try and bring that about. When everything fell apart, there was wisdom to acquire in noting who ran for the hills and who stuck around. I became a better judge of character and more judicious in extending depth of relationship.
A big lesson I learned here: there is strengthening, healing power in sharing your story and having someone care. One of my closest friends today is a woman who had interviewed me on her radio show a few times. When the organization fell apart, she reached out to me with a consistent message, “What do you need? How are you?”
Was she the source of my next work adventure? No. But she was the one who let me know that I wasn’t the only one who cared whether I rose from the ashes. Her willingness to find whatever relationship or resource I needed, once I figured out what to do next, made the next seem possible.
Let people help you. You don’t get extra points for doing it on your own.
Work for Others
Do you take a job working for someone else now or try to start your own again? Odds are, it’s a good idea to work for someone else—if only for a brief period. (And keep in mind that what you do next is not what you have to do forever.) However, don’t rush into it.
I went to work for someone else within a few weeks of the organization’s demise. The job was a bad fit for me from the beginning, and then the new company was purchased on week three of my employment. My position was eliminated. Yikes!
Why did I rush into such a situation? Well, there is that need to make money (not to be understated), but even more than that was a desire to prove that I was wanted in the workplace—that I was capable and worthy of earning a paycheck even though I’d tried a big thing and failed.
Yeah, we call that ego.
And she’s a wench.
After having my new position eliminated I took the time to go through the steps in this article. As I drilled down to those core motivations, the wise next steps began to come into focus. By reconnecting to the who and why of what I am and do, I could more easily decide where to now spend time. I could go after and get work that fed my motivations. In doing that, I’ve placed myself on a path that teaches and prepares me to be better in my chosen work.
You can do this, too. Once you’ve reminded yourself who you are and why you do what you do, then try to find work that speaks to those truths. For instance, I am motivated to make things better for people by using my ability to create media (write and produce). So, I applied to write for Foundr. If my writing this article made things better for you, then my motivation has been met—and it didn’t require me going to the trouble of envisioning a magazine, creating infrastructure, launching the platform, building the audience, overseeing employees, etc.
I’m recovering from years of being in charge. However long it took for your business to fail, you, too, need to let yourself recover from the time of being in charge. Find a way to do what you love, but not be in charge of it. You’ll know if/when the time comes to begin taking on the mantle of leadership again.
Maintain Integrity After Failure
Whether you take a job with someone else or take off to the Caribbean for a six-month escape, one maxim holds: Maintain Integrity.
Don’t lie about what happened. Don’t sugarcoat it. You tried something new. It didn’t work out. As you’ve read here, you are in good company and that is a normal part of entrepreneurial life. Own it.
Mr. Wallace, my real estate friend I mentioned earlier, shared with me about losing everything and climbing his way back up. When I asked him what to do, how to get through it, he said, “You can’t control everything that happens, but you can control how you react. So long as you take each next step with integrity, you’ll be okay.” The next sentence from Dave is emblazoned on my mind. “If you tell the truth, you will always remember what you said the last time you were asked the same question.” It’s really close to what is printed on the back of his business card, “You can’t go wrong doing what is right.”
Whatever you do, do it with integrity. No door worth being open will shut so long as you walk through this fire with integrity.
“All the failures contribute to your overall ability to do this thing.”
– D.B. Weiss
There is work for you to do—introspection, retrospection, closing up shop, taking new steps—but at the end of it all, remember to stand tall.
You did what many dream of doing: you tried.
You didn’t just talk about a dream. You put action, heart, passion, time, effort, money, and work behind it. You took a shot.
Not everyone can say that.
And no successful person can say they haven’t.