You’ve heard it before: 20% of businesses fail in their first year, 30% in their second, and 50% are gone after five. My first startup failed, so trust me when I say this: it hurts like you can’t imagine. But it’s also something no entrepreneur sees coming and doesn’t plan for. When you’re swept up in it (and you likely will be) it’s a critical growth juncture in your life, but only if you fail the right way.
The entrepreneurial explosion is here, and with the successes come some pretty epic failures. This week one strapped entrepreneur asked me about my own failure experience as he struggles to keep his startup afloat, and another funded startup founder told me he just broke the news to his staff they’re going under.
If you’re in the muck, now is the time to fail the right way. After the pain, things will get way better than you can possibly imagine.
What to do when your startup fails
When you’re looking down the barrel of startup failure, you begin to question everything, including your sanity. You had convinced yourself you’d be successful and knew precisely how to make things work. You saw the plan. But you were wrong. What else are you wrong about? Do you actually have any real knowledge or skill to contribute to another company? Will anyone hire you? Here are a few tidbits I learned from my failure experience, and from other epic failures.
You Need To Grieve.
Losing a startup, at least for me, was traumatic. I lost my revenue stream, which was terrifying. But I also lost my passion project and what I thought was my dream. While it’s vital to know you’re going to be way stronger when your startup fails, it’s also important to take the time to fully grieve the loss. I didn’t get therapy when my startup failed, and that was stupid.
To this day, I have permanent psychological damage and firmly believe I’d have avoided trauma if I’d found a therapist. Not to mention the burden on my wife would have been lighter—she put up with a lot. Please learn from my failure. Get help. Dr. Scott Barry Kaufman, of the Psychology Podcast, recommends Better Help. (Not a paid ad.) The best performers have coaches, so why not hire a mind coach?
Write Down Why You Failed
Don’t tuck away your failure or sweep it under the rug. Fully confront it, own it, and ask yourself why it happened. Failure is fuel, capable of propelling you to greater success, but if you ignore it you can’t learn critical lessons from it. High performers learn more from failure than from success. You can too, but only if you write it down. Here’s why.
It turns out, we are really crappy at remembering trauma in our lives. Seriously, just check out this episode of Build for Tomorrow on Covid Nostalagia. We’re also crappy at remembering things we don’t write down according to Dr. Bill Klemm. Because failure provides such a data-rich learning experience, write it down no matter how uncomfortable. The lessons you stand to learn are valuable, don’t lose the experience.
Look Deeper At Your Identity.
I believed my identity was being a successful entrepreneur. After all, I was featured in The Wall Street Journal and some other high-profile publications. Not only would my failure invalidate all my previous meetings, pitches, and keynotes, but I figured no one would listen to my advice on being a successful entrepreneur in the future. I was wrong.
The reality is that successful entrepreneurs are experts at failure. Sadly, many entrepreneurs forget or hide their failure—causing you to feel alone. Hyper-successful people have an intimately close relationship with failure. When they see another entrepreneur fail, the only thing that turns them off is when they don’t own it. Soon Yu, the former VP of Innovation for VF corp got his prestigious job because he was open about his many failures. Smart leaders want failures because they’ve already learned what not to do. When your startup fails, it’s a beautiful right of passage. Intelligent leaders find non-failures suspect.
Don’t Question Your Sanity
You probably convinced yourself your startup was the exception to the rule. You wouldn’t fail because of XYZ. Now, you’ve discovered you were wrong. This may lead you to ask yourself, what else were you wrong about? When your startup fails, do you have any skills worth applying elsewhere? Were you a fraud this entire time?
Just because you were wrong about your startup, means nothing. Even the brightest people are wrong, and heck you may not even have been wrong. The better idea and better startup fail all the time for various reasons. Consider Chemex, originally invented in the 40s, never saw commercial success until recently when Intellgensia’s CEO Doug Zell in 2010. (I’m stunned the company limped along for so long.)
Know Your Future Is Strong
Getting back into the workforce is somewhat straightforward if you fail under 2 years, according to Gustavo Manso’s research at the University of California, Berkeley. But what of the entrepreneurs over that time period? While it may be challenging for them to re-enter the workforce due to HR’s fear of entrepreneurs, (been there) entrepreneurs tend to make more money over their careers, than people who haven’t worked for themselves. According to the data, when your startup fails, you may actually make more money than your entrepreneurial endeavors.
When you have the stomach for it, you absolutely should tell others. Acknowledging failure makes you a better leader—failure hypocrisy is toxic. People know when you’re lying or denying your own failures, and it creates a wedge between your future employees or other entrepreneurs. I used to believe hiding my own failures, fooled others, but I was so wrong.
Today, I can see right through entrepreneurs or leaders who are hiding their failures. They use vague language, puff their chests up, and are closed off. If you pay attention, the people with real confidence and high self-esteem are quick to acknowledge what they don’t know, and how they’ve failed. Disturbingly, many entrepreneurs think their ruse is working.
In an informal poll I conducted, around 40% of entrepreneurs admitted to lying and misrepresenting their own success. In many ways entrepreneurialism is a bunch of failures, talking only about their successes. The fear, sadness, or anxiety entrepreneurs feel is because failure isn’t openly discussed—don’t be a part of the problem.
Failing With All of Us
I’ve interviewed so many people with incredible failure stories and will continue to highlight how bone-crushing failure is a part of the big-idea process. If you’re a failed entrepreneur, let me know what else needs to be included and sign up to get updates. I’d love to meet you and share other failure stories with you.