The Key to Small Business Success: Failure
15 July 2006One of the most oft-lamented facts of life about starting your own business is that the vast majority of them fail. A study described here in Business Week looked at traditional, brick-and-morter businesses over a 30 year period and found that nearly two-thirds failed within ten years of their founding. The rate is probably even higher for Internet-related businesses, which don’t have much of a barrier to entry. Imagine how many people each year try and fail to sell things over E-bay, run a new website, or start up a blog. They’re easy to start - but easy to abandon as well.
The conventional response is simply to give up. Prospective entrepreneurs are told that they must risk their savings on an all-or-nothing shot - and you only get one, with the odds heavily stacked against you.
This response is bunk. The most important thing a new entrepreneur can keep in mind is the Edison principle: failure can be a success. Thomas Edison considered this crucial to his vast scientific achievements. When told by an assistant that he must be depressed over the thousands of failed tests he had attempted in developing a battery, he replied that he hadn’t failed: he’d proven that thousands of things didn’t work.
This isn’t just a pithy quote - it has a nugget of wisdom that all entrepreneurs should keep in mind. Namely - what you are doing is an experiment. It’s no different from what Edison did - you have a goal of having a successful business in a certain field, and to do that you’re going to have to suffer some failures along the way. The trick is to fail successfully. How can you do this?
1) Fail cheaply - don’t bet the farm on one way of doing things. If you’re trying something new in your business, it should always be something that won’t kill your business off if it doesn’t work.
2) Remember that it’s highly unlikely that you’re going to hit on the best way of doing things right out of the gate. This is especially important for new entrepreneurs to remember. Your business will likely have to go through several iterations before it gets to something that will work well.
3) Related to #2, don’t be afraid to admit that something you were doing has failed. If a change in your business or a way of doing things is losing money, you need to be able to shift directions and try something else. To do that, you’re going to have to be able to admit that you failed. The key is not to let the failure drag the business down with it.
4) Remember that the Internet, in lowering the barriers to entry in starting up a new business, has also made it easier to experiment. And that’s what any good business should be - a continuing set of experiments in how it can be effectively run. For example, if you run an E-bay business, it’s fairly cheap to test out new product lines. You already have the infrastructure in place, you already know the mechanics of shipping and selling things - you shouldn’t be afraid of trying a new product for sale and finding out it’s a dog. If you sell products through a web site, you should be testing out different formats, different looks for the site, etc. in an effort to figure out what is most likely to make your customers buy. In fact, if you have ideas about multiple different ways you can structure your site, why not try them all? It costs virtually nothing to host a new domain.
5) Learn from your failures. If you’re just randomly trying out different things in the hopes you’ll hit on a miracle solution, you’re wasting your time. You need to evolve your business - what doesn’t work should give you ideas that will clue you in on what does. Sit down and think about what went wrong, and what you can change about it that might fix it next time. You should also be aware of the various skill sets that you could be learning. In the process of starting your own business, you’ll have a chance to learn skills that can be useful to you even if you fail completely and are forced back into the life of a working drone. From web design, to marketing, to programming, to writing - you can pick up virtually any skills that you want as part of operating a small business.
6) When you find something that works, keep doing it. But don’t quit trying new things. The goal of experimenting in your business isn’t to find one way that works. As Edison said, it’s also to find out what doesn’t work - and that process of experimentation can be extremely important if market conditions or the tastes of consumers change in a way that makes the business model that used to work obsolete.
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