The Big Lessons I Learned From My First Entrepreneurial Failure
My first business ended in failure.
And let’s face it. Entrepreneurial failure is painful. It’s embarrassing. Society can view failure as a sign of weakness and disgrace. People judge us when we fail, and it takes an emotional toll, sticking with us long after we think we’ve moved on.
But my entrepreneurial failure wasn’t the end of the story. In fact, if you learn the right lessons, failure can be the foundation of any entrepreneur’s future success. It certainly was for me.
Jeffrey Seller, the producer of the Broadway musical Hamilton, failed a lot on his way to success, and he has his own theories about why people fear failure. Seller concludes that most folks don’t have the tolerance for all the negative feelings that come with failing—like pain, bewilderment, and anxiety.
“Success feels good,” Mr. Seller says. “Success is, in its own way, easy. … It’s easy on my stomach and on my heart. It is also true that the feelings that failure evokes are so much worse than the positive feelings that success evokes. I’ve heard of tennis players who say, ‘I never feel as good winning as badly I feel when I’m losing.’”
John Lee Dumas made another great point about failure on his daily podcast, Entrepreneurs On Fire. He says that most people are afraid that if they don’t succeed in their business venture after leaving their 9-to-5, they’ll end up homeless under a bridge somewhere, roasting a rat over a fire. In reality, he says, that’s not the case at all. You will find a way to survive and provide for your family. Still, you tend to imagine the worst.
Fear is a normal human instinct, but it shouldn’t prevent you from achieving your dreams. In fact, popular schools of thought now suggest that failure is not a bad thing at all. In fact, we should embrace failure and fail often, because in the majority of cases, success is built on failure.
As Henry Ford said, “Failure is just a resting place. It is an opportunity to begin again more intelligently.”
The Story of My Entrepreneurial Failure
My friend and I started an ecommerce jewelry company 10 years ago. After two years in business together, we began to disagree on which direction to take and how to continue growing.
We didn’t share the same vision either. I wanted to build an eco-friendly jewelry brand, and she wanted to create a generic jewelry line. I began to notice that she wasn’t putting in as much time, and it seemed as if she was losing interest in the work. Sure enough, one day she asked for a meeting and told me she wanted out.
Having a co-founder is as much a business decision as it is a way to maintain emotional and moral support. A co-founder is someone you can collaborate with and bounce ideas off of, and when you no longer have that support, it’s a little scary.
The decision to continue down the path of building your business or close your company for good is a tough one. You start thinking about all that effort you put in, the money you spent, and the endless hours that it took to create.
I’ve always been very driven, never wanting to stop until the job is done, so I started to question myself. Was this all for nothing? Should I see if I can still make it work? Ultimately, I took a long look at myself and the business and found that I too had lost the drive and wanted something new.
We decided to end it. And just like that, I went from an entrepreneur living the dream, to someone who tried, failed, and walked away. Or so it seemed.
Did my first entrepreneurial failure hurt? Absolutely.
But it was also a learning experience that taught me what not to do the next time I built a business. Though it was definitely disappointing, I’m still around to tell the tale. Living proof that failure is often just the beginning. And ultimately, I learned a lot from closing that company.
Here are a few of the lessons I took away from my entrepreneurial failure:
You Need To Have A Vision
As I learned, problems tend to arise when co-founders have different visions for their company, especially when they fail to communicate or talk about it until it’s too late.
Gino Wickman, author of Traction: Get a Grip on Your Business, talks a lot about the importance of having a vision for your business. To him, vision means “clearly defining who and what your organization is, where it’s going, and how it’s going to get there. It should be simple to articulate your vision, because it’s probably already in your head.”
When my partner and I first started our jewelry company, we were so focused on selling our product and getting customer feedback that we never bothered to write down our vision. We never even asked ourselves what the company’s goals were, or what we wanted our business to look like in five years. As a result, we didn’t really know why we were doing what we were doing.
So make sure you start by outlining a vision for your company. What do you want to build or create? Who will it serve? How will it make an impact on the world?
You may not know all the details regarding your end product, but you should at least be able to articulate the essential concepts of your business and its purpose. Be ready to explain it to any potential investors and employees, and be in agreement with your co-founder.
In his book, Mr. Wickman introduces a framework of questions to help effectively define your vision. Try answering the following questions to clarify your company’s vision:
- What are your core values? Name three to seven guiding principles that define your culture and who you truly are as people. This allows you to attract like-minded people to your organization. Examples: honesty and integrity, fun place to work, respectful, every employee is a leader.
- What is your core focus? Create a mission statement that helps you stay laser focused. A good example is LinkedIn’s: “To connect the world’s professionals to make them more productive and successful.” This shows exactly who they serve and how they do it.
- Where do you want your organization to be a decade from now? Examples of 10-year targets: Achieve 20 percent of target market, $X million in revenue, or expand to 3-5 countries. Your 10-year target should be something big that inspires you and your employees.
- What is your marketing strategy? Define your target market and what makes your company unique. Don’t try to be all things to all people. Who are you trying to serve? Small business owners? Kids? How will you reach them? To learn how to build a profitable marketing strategy, read this.
- What is your three-year picture? What do you want your business to look like in three years? What is your projected annual revenue? You need to write it in a way where you can close your eyes and visualize it. Examples: Open 10 stores or reach $1 million in revenue.
- What is your one-year plan? Define what must get done this year. This is where you articulate what goals need to be achieved to accomplish the vision. Examples: Reach 5,000 monthly active users by the end of this year. Break that down into quarterly priorities, the things that will help you reach your one-year goals. For example, develop a new feature that will generate new revenue or launch a new affiliate program.
- What are your issues? Identify obstacles that could potentially prevent you from reaching your targets, and discuss how you’d solve them. Write down anything and everything you can think of that might prevent you from achieving your goals and then discuss how you might be able to solve them. Examples: We don’t have enough money to run a $50,000 marketing campaign; we don’t have the right resources; or our investors won’t support this.
Choose Your Business Partner Wisely
Obviously, I did this wrong the first time around.
When starting a business, lots of people pick a friend, a family member, or even a spouse as a co-founder. On one level, this makes sense. Presumably, you already get along and trust one another, which makes it easier to work together. On the other hand, while getting along with your co-founder is important, you don’t actually need to be close friends.
In fact, in most instances it can be better if you aren’t that close because if the venture goes down the drain, you could jeopardize the relationship.
In my case, I picked my best friend. I’d known her for years, so it was easy and we trusted each other. At first it was great, as it always is during the initial excitement of starting something new. But when we didn’t see eye to eye on things, frustration started to build. Roles weren’t clearly defined and we disagreed on the direction of the business.
We decided to save the friendship and end the partnership. Today, she is still one of my best friends.
After learning something about the process of choosing a co-founder from my first big entrepreneurial failure, I did things much differently this time around. I ended up with the right co-founder for my current business, ezClocker, by using the following process:
Start by creating a list of all the people you’ve enjoyed working with in the past and write down skills you think your business needs that would complement your own.
Make A List Of Everyone You’ve Worked With Before
In my case, I was looking for someone who had strong technical skills, and could be the CTO of the company. I also wanted someone who had good leadership skills and could mentor junior engineers. You have to first know yourself and what you are good at, and then look for skills that complement yours.
Ask yourself, are you a business person or a technical person? Are you the process-oriented type or a creative who needs someone to balance you out and keep you focused? Write down those skills and attributes, and then cross-reference them with the list of people you just made to find someone who fills the gaps in your own talents.
Narrow the list down to your top two or three candidates and meet up with them. Treat it like an interview, and ask questions that are important to you.
For starters, are they interested in building a company with you? What kind of culture would they like that company to have? What’s important to them? Would they eventually aim to sell the business or do they want to run it for the rest of their lives? If they’re interested in selling, what kind of price would they need? All of these questions will help you figure out if your candidate shares the same values and vision you have.
Take your time in choosing your co-founder. Test out the business idea, build a prototype together, do market research, and get customer feedback.
In other words, date that person for a while before you make the commitment and sign those partnership papers.
A Mentor Can Save You From Entrepreneurial Failure
I didn’t have mentors when I started my first company, and it was one of the biggest mistakes I made.
I thought reading books, attending conferences, and listening to podcasts would give me enough business knowhow to succeed. But when you’re faced with certain unforeseen challenges—like Facebook ads that aren’t performing, or getting feedback on your investor deck—that’s when a one-on-one mentorship can make all the difference. The past experience and hindsight of a mentor who’s been where you are is invaluable when starting a business.
Sometimes a mentor will help calm your nerves when you need it. A couple of years ago, I was working non-stop on my startup, when suddenly this panic came over me. I thought, “I’m working hard, but am I working toward the goals we’ve set? Am I even heading in the right direction at all? How would I know?” So I met with my mentor and told him how I was feeling.
He just smiled and said, “Raya, you sound like every founder I know. Don’t worry, you’re doing fine.” And just like that my fears were eased.
Having a mentor is key to avoiding potential entrepreneurial failure. According to TechCrunch, your startup is actually three times more likely to succeed if it has a mentor. Mentorship has a stronger correlation with a company’s success than the age, experience, or background of the founders.
But how do you go about finding a mentor?
In my case, I attended startup networking events in Dallas, where I live, and at one event someone told me about a local non-profit organization called the Dallas Entrepreneur Center, which offers co-working spaces and mentorship programs for startups. At that time they were offering unlimited meetings with startup mentors for $100/year.
It might sound strange to pay for mentorship, but that was the best $100 I’ve ever spent. Don’t despair if you don’t have a similar organization in your town. There are plenty of incubators and online organizations that offer mentorship, like 1M/1M, Techstars Anywhere, and 1776.
You can even get advice from famous entrepreneurs if you know how to go about it. Try to connect with well known mentors you admire by reaching out via social media. But don’t just comment that you found their post interesting. Answer a question they posted or give some valuable feedback.
Try to meet mentors offline by going to smaller gatherings or events they’re attending. Did they just join a new social network? Are they part of some closed Facebook or Slack groups? Try to find them in these places, where they’re not busy or bombarded with fans. Then approach them and make yourself stand out.
Success Means Keeping Yourself Motivated
“People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.” – Zig Ziglar
Entrepreneurship can be an emotional roller coaster. One day you feel like you’ve got the billion-dollar idea, and the next you’re questioning your sanity, and even whether this entrepreneur lifestyle is for you.
Motivation is like any other positive habit—you have to train yourself to keep it up. And it’s helpful to have a few techniques in your back pocket for when you feel like your motivation to work on your startup is almost drained.
I have some simple inspirational tricks for maintaining that motivation:
Listen to or read something motivational on daily basis. Practice meditation to clear your mind. Write down your goals and keep them displayed next to your monitor. (Hey, sometimes it’s the little things!)
Personally, listening to podcasts has been one of my main sources of motivation. During my daily walks, I’ll listen to a podcast about entrepreneurship and learn something new almost every time.
When you hear an interview with a company founder who says she wakes up at 4 a.m. every day to write another chapter of her book before heading into work, it gives you perspective. It makes you say things like, “Wow! And I thought I was working hard!”
Or you’ll hear about a business owner who lost everything and then brought himself back from ruins. That kind of story can motivate anybody to push through the low times in their own business and life.
When I listen to inspirational interviews like these on my morning walks, I go home energized and eager to start working. Some of my favorite podcasts are EOFire, Traction, and The Three Month Vacation.
Make Sure Your Business Goals Fit With Your Life Goals
When I started my first company, I fell in love with the idea of having my own business. I was fascinated with marketing and running a business, but not with the product itself. There’s a big problem with doing things that way. If you’re not careful, you might end up building something that is at odds with your life goals.
For example, if you hate managing a large team or you don’t want to be tied to an office, make sure your business is aligned with those priorities. While working on my first business, we discussed opening a physical store to sell jewelry. Not once did I stop and say to myself or anyone, “Wait, I don’t want to tie myself to a physical location where I’ll have to be almost every day!” I was only focusing on growing the business.
My advice? Before you write down your goals for your business, write your goals for your life. Your personal goals. Where do you see yourself in five, 10, or even 20 years? Do you want to be location independent? Do you want to be tied to a set schedule or would you rather have flexibility? How much time do you want to spend with family and friends?
Then write down your business goals. What do you hope to achieve? Ask yourself what price it would take to sell your business. (Everyone hopes to sell their company for millions of dollars, but put a realistic number on it.) If you sold it for $5 million, how much would your share of that be? Would it be enough to take you to the next phase of your life? (And you’ll know what that next phase is because you wrote it down in that “life goals” section.)
Align your business goals with your personal goals to make sure you don’t end up building something you don’t want.
Success Is Built On Failure
In the end, every lesson I learned from my first entrepreneurial failure helped me build a better company. My current startup, ezClocker, wouldn’t be where it is today without those experiences.
Failure is frequently a stepping stone to success. Economists actually confirmed it.
By studying small businesses, they found that 71 percent of first-time entrepreneurs who failed didn’t bother to try again. But the tough 29 percent who picked themselves up and started second businesses were more likely to succeed. Success rates actually increased based on their number of past failures.
The economists’ reasoning? “Experience, even when it’s not positive, is invaluable… entrepreneurs learn effectively from mistakes as well as from successes.”
And I’m definitely not alone in my entrepreneurial failure and subsequent success. If my story didn’t convince you to take risks and embrace failure, just take a look around at the many famous icons in the industry who didn’t succeed until they failed (and in some cases, failed many times).
Amazon CEO Jeff Bezos launched a site for auctions that failed, and then a company called zShops, which also failed. Eventually though, his ideas morphed into Amazon, and we all know how that story ends.
Twitter cofounder Evan Williams built a podcasting platform known as Odeo, but it never took off. His company folded after Apple introduced their podcast section of iTunes right after his launch.
Christina Wallace is VP of branding and marketing at the Startup Institute, but when her own startup Quincy Apparel shut down, she stayed in bed for three weeks. Ms. Wallace returned to the industry open about her failures, saying, “I don’t celebrate failure for failure’s sake, but I think there is something amazing about trying to do something at the edge of possibility and potentially failing at it.”
Failure is certainly discouraging and painful, but it’s not all bad. If we can learn from our entrepreneurial failures, they can become building blocks for something greater. And fear of failure is no reason to be afraid of starting your own business in the first place. Having a positive mindset, learning from your mistakes, and maintaining the willpower and courage to keep pursuing your business goals will help you get over any failures you might encounter.
Just remember this quote from Denis Waitley: “Failure is like fertilizer; it stinks to be sure, but it makes things grow faster in the future.”
The Big Lessons I Learned From My First Entrepreneurial Failure was originally published on Foundr