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Starting
three companies -- two of which didn’t take off the way I envisioned -- taught
me that while entrepreneurs should dream big, it’s essential that we also plan
for failure.
More than 90 percent of startups fail.
And recognizing this right off
the bat will prepare you intellectually, emotionally and financially, if your
venture doesn’t succeed.
Planning for failure doesn’t
make you negative or paranoid. It makes you smart. First,
there's a huge difference between preparing for failure and thinking you’re going
to fail. The latter is highly discouraging and curtails growth. The former, on
the other hand, is about being practical and thoughtful about all of the
possibilities that may occur. In some ways, it can even encourage entrepreneurs
to progress because being prepared quells fear and prods you to keep going.
I always plan for worst-case
scenarios, considering how they may affect my team, their lives and how to
mitigate them. For example, I need to think ahead: What if we were to lose one
of our largest clients? How would that impact our cash flow, company morale and
what would my investors think of the company’s outlook? It’s difficult to think
of these scenarios, but I believe it’s necessary to plan for it. In some cases,
planning for failure helps me anticipate challenges so I can prevent them from
happening.
Additionally, being honest with
yourself and thinking about potential failure enables you to identify mistakes
that you’re making in your business, so you can correct them more quickly along
the way.
It helps you be more
objective. Starting and running a business can be a very emotional
experience. Your company is your "baby,” after all, and it’s something
that you’ve poured a lot of heart and passion into. Forcing yourself to be
prepared for the worst can help balance that out. How? Planning for failure or
thinking of an exit strategy pushes you to be less “clingy” with your company.
It forces you to look at the facts and unpleasant possibilities (no matter how
difficult), thereby enabling you to be more analytical and objective.
Being a bit disassociated from
your company also gives you more perspective because it allows you to look at
it from the vantage point of your investors or customers. This, in turn, helps
you generate ideas or even catch errors that you may have missed being too
close to your business.
Toward the end of my first
company's existence, my co-founder Andrew Waage and I forced ourselves to
evaluate the business from a customer’s perspective, and we learned that the
solutions we were building simply did not solve a problem that was big enough.
We set our emotions aside and closed the business because when looking at the facts,
we did not have a business. We would have not had the courage to face our
failure so quickly if we didn't plan for it.
Recognizing that you might fail
keeps you on your toes. Acknowledging the possibility
of failure prevents you from being complacent. Knowing that at any point your
venture could take a wrong turn keeps you from resting on your laurels, which
means you strive harder and don’t let success lead to hubris.
Never became too
self-satisfied. Remember it takes years to build a company and one simple
mistake to bring it all back to nothing. Never lose sight of that. It's
important to stay focused and hungry.
Planning for failure makes it
easier to move on. Preparation
can help soften the blow in the event that your company hits the rocks. Looking
back, I don’t think I would have been able to move on quickly from my
unsuccessful ventures if I hadn't prepared for the possibility of failure.
When my first startup didn't take off, Waage and I were prepared to deal with the circumstances. We had planned for it mentally, emotionally and financially, and decided we weren't going to take it personally, which was why it only took us two weeks to
recharge and start our next venture.
No one wants to face the
dreaded “F” word, but even the most successful entrepreneurs experience their
share. It’s simply part of the game. And, who knows? It could even serve as the
foundation for something far bigger and better. http://www.entrepreneur.com/article/233275
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