Failure is a part of business, but when your own startup stalls, it’s hard not to take it personally. In this article, Mark Phillips discusses how entrepreneurs cope with the taste of defeat without it slowing them down.
There are plenty of sobering statistics available to budding entrepreneurs that show the likelihood of a startup failing, but they are not much use to a new business owner once the probability of failure becomes reality.
Then again, according to the bestselling The Millionaire Next Door, the average millionaire goes bankrupt at least 3.5 times, so perhaps it’s a case of better luck next time – assuming there is a next time.
“Failure will visit you regularly,” warns Group Colleges Australia (GCA) founder and CEO Alan Manly. “It is a bit like in a mafia movie – ‘It’s nothing personal’.”
A passionate entrepreneur, Manly has more than 30 years of experience in the technology and education sectors, culminating in the foundation of GCA – a range of training institutions that expanded to include the Universal Business School Sydney (UBSS) MBA program to support the next wave of Australia’s entrepreneurs.
By the time he became a full-time entrepreneur and faced bankruptcy, he was over 40 years of age and poorly educated in that year nine doesn’t impress too many, and self-confessed business failure.
“Hence, I declared myself a consultant, and the gods smiled upon me. That was 30 years ago,” Manly reveals.
“Some folks give it a go as an entrepreneur and are smart enough to learn that it is not for them,” he said, utterly rejecting the old saying, ‘you’re bound to succeed if you keep at it’.
“The art of running a startup is to be pragmatic. It is only a business opportunity. That means a constant review of the business plan and if it is obvious that you couldn’t talk a stranger into investing, then maybe you should move on before it is too late.”
Strategic surrender is not defeat – it is a strategy, Manly emphasises.
“Surrendering one startup to survive to learn and move on is more important than letting your ego lock you into a disastrous failure.”
Even so, many entrepreneurs still find it hard to give up on a business idea they may have harboured for years, despite the real possibility of ending up the founder of a failed startup with creditors calling and with no idea where the next paycheque is coming from. For Manly, it brings back painful memories of the five stages of grief.
“The first stage is denial. I would share with the caller my concern that the account may not be mine – sort of passive denial. It often gave me a day or so.
“The second stage is anger – why are you calling me without the full details? This created a small amount of confusion. [For me] the third stage was depression. There’s really no need to be depressed, but owing money is a good way to start. Talking softly and slowly garnered sympathy for a minute or two, then I would excuse myself from the call, saying I was not feeling comfortable, and not answer the phone for a day or so.”
Bargaining is frequently the next stage, where one option could be to offer a small payment as a token of agreement subject to the full amount owed being discussed later.
“The stage you want to reach is acceptance, being that you could/would/maybe pay something if you could gain acceptance for a lesser amount,” Manly said. “It’s not always successful, but by saying you are also seeking advice on declaring bankruptcy will usually buy you another week or two.”
Is this a path any entrepreneur really wants to travel? Certainly not, but in the post-mortem of a failed business, it is imperative to move past the denial stage and objectively evaluate what went wrong – a process that may even be cathartic.
It could have been any number of things: overpricing; lack of planning; living too high for the business; inadequate knowledge of financing and record-keeping.
According to Manly, the key question to ask yourself is: “What did I learn?”
Becoming an entrepreneur, he believes, is “almost like a freedom ticket”. But, being deep in debt after a failed startup can restrict that freedom, which is why many entrepreneurs who have been down the same path recommend reaching out to your support network to find a job, earn an income, pay down debt and buy time to properly consider your next move.
As Manly notes: “Always keep in mind a quote from Richard Branson: ‘Business opportunities are like buses, there is always another one coming around’.”