A few weeks ago, I made a reflection on failure in business, because I think it is a taboo. It is a topic that is little talked about and is on the agenda. According to Eurostat, 47% of self-employed entrepreneurs who start up a project close after three years, a percentage that increases to 65% after five years. And yet, in our conversations, there is never a person who openly says “it went badly for me”, or “I had to abandon my business because it didn’t work”. Am I wrong?
And why don’t we talk about it?
Because failure in business is still perceived as something negative, as something bad, when throughout life we all fail in some aspect or another, and the good thing is that it makes us grow, learn and evolve. And we do not always consider or value it as such. If we analyze our failures objectively, trying to put aside the emotions of frustration or sadness that they can cause us, we can learn a lot. The same thing happens with business.
The problem is that this taboo has grown into a ball. At least I see it that way. Especially in the entrepreneurial world. In recent years I keep reading and listening to coaches and mentors who insist on the idea that if you do what you like, fight for it tooth and nail every day, work hard and don’t give up, in the end you will succeed. And as a result of these reflections, it seems that if your company does not work, it is bad because you have not fought hard enough. And no, it is not true. Perhaps because I live with many companies, for me it is something common that a company does not work, or stops doing well and has to close or pivot.
Setting up a business and taking it forward is very difficult and not always all the variables are under our control. It is clear that in order to make a business work you have to dedicate hours, many hours, and even more at the beginning. We must also be aware that overnight it will not be profitable, and therefore we must leave a margin of at least 18-24 months to see if the project is viable. But when you have tried again and again and the numbers do not come out, you have to stop, analyze the company’s finances, see why the desired numbers are not obtained and if a solution is detected (raise prices within market margins, adjust costs, save on suppliers, increase or reduce production …) apply it and see if it is effective.
However, if it is detected that there is no solution, if we see that the market does not respond to our proposal, that no matter how much time and money we invest the numbers do not come out, the smartest thing to do is to close. Moreover, when we see that after several months or years the results do not come out, sales are reduced, and we are increasing the indebtedness, at this moment the sooner we close, the less debt we will have, the less frustration we will feel and the sooner we will be able to recover from the blow.
We have to be honest
Sometimes, we bet on projects that do not work no matter how many hours we dedicate to them, no matter how much passion and how much we like them. AND ABSOLUTELY NOTHING HAPPENS. For a business to work, it has to make sense for the market, we have to find the right balance between investment, innovation, avoid excessive over-indebtedness, sales have to support the cost structure of the company, that is to say, the numbers have to balance at the end of the month and at the end of the year. Giving up is good. It allows us to take a step back, to see things from a different perspective and to look for and even find the right path. And we will not be the first or the last to fail with a business idea. In fact we have many examples of great entrepreneurs who, before reaching success, have in their history several failed companies that never came to fruition or that pivoted into something completely different from their initial idea.
I come across cases on a daily basis, people who started down a path, made a mistake and from a supposed failure another new project came out. Be aware that you can make mistakes, that you have the right to fail and start again. This is what business is all about.