How to survive first failures and fight another day
Four out of five British start-ups fail.
If an 80% chance of failure doesn’t turn your stomach, the insecurity of start-up life will. To be successful, being excited about change and accepting of failure is the only way to keep disappointment from overshadowing the thrill.
So go out and fail. Then fail again. Be smart about it, but a few nasty falls will teach you more than any business class. From saving money with virtual or serviced offices in London to being ready pull the plug at any time, here are some tips for budding entrepreneurs who want to fail well.
Put in the time
According to the 10,000 hour rule, it takes five years of full-time employment to become fully proficient at a task, or a decade to master a 3-hour-a-day hobby. Don’t necessarily quit your day job to spend five years crashing start-ups, but make a hobby of starting (and failing) cheap software projects and mobile apps to get some experience under your belt before you touch a penny of investors’ cash.
The Paly Entrepreneurs Club at Palo Alto High School, recently profiled in the New York Times, is a group of students who create apps and tech start-ups in their spare time as a parallel to their education. By the time they graduate from university they’ll have 5+ years of business experience under their belts – and they are your competition. Be afraid, and be prepared.
Research from the Startup Genome project shows that failed start-ups grow at over ten times the speed and raise three times as much capital in the early stages of their business, compared to the slow and steady businesses which survive. So cut back your expansion plans and save money for what’s important.
Overhead costs can take up most of your budget sheet – cut back by working from home or renting a desk at serviced offices in London. If you’re really looking to impress, a virtual office in Manchester or elsewhere can give the impression of multiple locations and project an aura of success, while being vastly cheaper than actual office space. This positioning may enable you to better pitch for investment and meet interested parties in other cities, while maintaining a professional atmosphere (Starbucks meetings might be fine for developers, but at least rent a meeting room for the big guys).
Identify the problem
So you’re working in a flashy shared office space, you have investment, you’ve made a business plan, you can finally afford a new pair of shoes without holes… and your sales start to dive. It may be your instinct to blame the economy, check for new competitors or take a panicked look at your business plan – but before you do this, check your website analytics. Run A/B testing and keep a keen eye on bounce and conversion rates; don’t change your business plan if all you need to do is redesign your landing page. Yes, it’s obvious, but you’d be appalled by how many people never consider this.
You will be in denial
Don’t fool yourself into thinking you will be clear headed about the failure of your business. Designate some trusted staff to be the bearers of bad news – tell them to approach you if they ever feel there’s a problem in the company or the industry. Most employees are afraid to rock the boat, but if keeping an eye out for bad news is in their job description, they’ll be far more likely to point out problems.
Don’t drag it out
Have you ever spilled a drink and sat in dumb shock, watching it trickle down your leg while friends run to grab a towel? Don’t let that happen to your business. If you’re haemorrhaging cash and it starts to look fatal, react as quickly as possible. That may mean reacting to changes in the market and pivoting the business, or shutting things down for good before the loss becomes insurmountable.
Draw up a battle plan for how to handle a pivot if it ever becomes necessary. You won’t know what the change will be, but you should know how to manage it. Don’t expect to sleep well over it, but it’ll save face and save money in the long run. In addition, if investors see you’re not a money-waster, you may have better luck securing funding the next time around.
Just because 4 out of 5 start-ups fail, doesn’t mean that 4 out of 5 start-ups are a waste of time or effort – Richard Branson ran two failed business before starting Virgin. Keep track of the lessons you’ve learned, and you’ll be able to respond to your early failures with success.