Business failures offer valuable lessons
Businesses can fail for a lot of reasons, whether it’s related to the product, insufficient capital, or not overcoming disruptive changes. Failure offers a great opportunity to learn. As Microsoft co-founder Paul Allen said, “Each failure contains the seeds of your next success.” So what are some of the top takeaways from failed businesses?
1. Figure out what you’re learning
Business failure offers an opportunity to learn. However, you don’t have to wait to fail before taking stock of your progress. No one has all the answers and experience could be the best way to grow as an entrepreneur. Consider the industry-specific insights, budgeting and finance lessons, employee-management learnings, or anything else relevant.
Regularly stop and identify your learnings so you can adjust your trajectory. Practise continuous improvement with your business plan. The more you learn and apply your new knowledge as you go along, the more likely you’ll recover quickly from setbacks.
2. Transform lessons into processes
Apply the lessons you learn along the way. This can mean you change things up at a strategic or cultural level, where the change is more abstract. In addition, where possible, transform these lessons into specific processes that protect your business from the same mistakes. These can apply to your employees, daily operations, functions, and any other relevant elements in your business. In addition, leveraging the right digital technology can assist you with developing powerful new business processes. It can make your operations more responsive and dynamic. By transforming your new insights into processes, you’ll be capitalising on your failures. You’ll also reduce the risk of the same errors happening again.
3. Address an actual problem
Some businesses fail because they’re not addressing an actual problem with a large enough market. This is even if they have a great product and a capable, talented team. The best products or services can’t produce a profitable business model if you don’t have enough customers who are willing to pay for them.
Start with market demand and work backwards to find the right solution. Regularly seek feedback from your customers or target market. Find out their pain points and discover the solutions they want.
4. Go beyond opinions for feedback
Avoid relying on personal opinions or your gut instinct when it comes to product and service offerings. Some businesses might know they have a wonderful solution. They find they’re getting a lot of positive feedback from customers. Yet, sales volumes are far lower than expected. This may be even though they’ve created a highly effective sales process.
This relates, again, to the issue of a large enough addressable market with, most importantly, paying customers, which can be a major factor in business success or failure. Sometimes you need to do more research to investigate what’s happening. You might find your potential customers like the idea of your offering. However, when it comes down to it, their problem isn’t pressing enough for them to pay a certain amount for the product or solution.
If your target market has a real problem but isn’t doing anything to solve it, they might be happy to live with the issue. In this case, you might end up not having a large enough market. As such, always get as much data about whether they’re willing to spend to solve the problem or not before you launch. Test customer behaviour rather than relying on stated opinions. Don’t take email sign-ups and web traffic as a definitive answer to how many paying customers you’re likely to have.
5. Don’t get caught in your fear
Getting a business off the ground and keeping it running requires dealing with a lot of uncertainty. Lots of things, especially the operating environment, are out of your control. This can be exciting – or frightening. Whether you’ve failed or not, avoid getting stuck on your fear. This enables you to keep taking calculated risks and identify new opportunities for growth and success. It helps you make the tough decisions that could eventually see your business thriving beyond expectation.
6. Prioritise business, product, and finance
A business has a lot of moving parts. The big three, especially for startups, include product development and creation, maintaining a functional business, and raising capital or the money side of things. These three need more or less the same amount of attention and effort. Business failures can result from focusing on one or two of these at the expense of the other elements. As such, without a good balance, your business could be headed for failure. Ensure you or your partners have the right skills to manage all three elements.
7. Proceed with humility and build resilience
Whether it’s a major failure or a minor setback, take the opportunity to proceed with humility. Losing a customer to a competitor or failing to reach your sales goal in time can be a painful experience. However, you can use the opportunity to grow stronger as a leader and business. Take responsibility and avoid blaming others, whether as an individual, team, or whole business. Admit your mistakes, review how you can improve next time, and move on.
Humility sets the foundation for a resilient mindset, whereby you and your team learn from setbacks and remain accountable to others and yourself. You can then move past these stumbling blocks by committing to growing stronger and more effective as a business.
8. Work with complementary partners
As you learn more about yourself as an entrepreneur, you’re likely to come up with discoveries about your strengths, weaknesses, interests, or dislikes. Consider working with a partner or partners who can bring what you might lack. For example, you might be a creative, big-vision thinker and dislike compliance and the financials. In this case, look for business partners who love looking after the details. This complements your strengths and rounds out your team with the necessary leadership skills.
Of course, always ensure any partner you commit to working with aligns with your values. Beyond complementary skill sets and knowledge, look for things like trustworthiness and a similar approach to conflict management.
Learning from failure drives your business forward
Avoiding failure is important, but learning from failure can support smarter decision-making. Turn these lessons into actual processes in your business. Build resilience and work with people with complementary skills. Above all, make sure you have a large market of paying customers and focus on the finances and business operations, not just a viable product.