Although our culture celebrates the notion of the successful entrepreneur who has a great startup idea, launches their business in a garage and builds it into a multi-billion dollar enterprise (think Steve Jobs or Jeff Bezos), 95 percent of startups actually fail, according to The Huffington Post.
While we don't read much about it, startup failure is far more likely than success. Startups can and regularly do fail for many reasons: there was no real market need for their offerings; they ran out of cash; they didn't have the right expertise on their team; the price or the product was wrong ... the list goes on. However, while failure is almost always difficult to swallow, when you're an entrepreneur, it can also teach you some valuable business lessons.
One Example of Startup Failure: Upper Street
Julia Elliott Brown co-founded Upper Street in 2009. It was an online platform that allowed customers to design and purchase their own shoes — a great startup idea. They offered hundreds of options that could be combined into over 5 million possible pairs of shoes, according to The Telegraph. Upper Street prioritized growth over profit and soon gained a large and loyal customer base. However, since profit margins were small, Brown had to continually seek new, external funding to keep the operation running.
Then, at the end of 2015, something unexpected happened. Upper Street's growth hit a plateau, while its need for cash did not. No matter what Brown tried, Upper Street would quickly run out of cash.
Brown weighed her options carefully and decided that she'd reached the point of no return. Sinking more cash into the business was not an option, so she sold all her company's key assets to a competitor and closed up shop. It was emotionally devastating, but Brown took valuable lessons away with her, which she plans to apply to her next venture.
3 Lessons From Failure
1. Define a Problem
The most successful startups — the ones that become large enterprises — are often fanatical about focusing on solving customer problems. If you're only in it to get rich or be your own boss and your product or service doesn't solve a clear customer need, you may be more prone to fail.
2. Be Ready to Pivot
The startup buzzwords of the day are "iterative" and "agile," meaning you should look at failure as actionable feedback for making improvements. Think of your business as a hypothesis you're constantly testing (because it is).
3. Invest in People
People really are a hugely important business asset. If you can build a talented and passionate team, you may be more likely to succeed. Hiring is expensive, but bad hiring decisions can kill a startup before it even gets off the ground.
Failure can be painful, but you need to view it as part of the learning process. There's real value in the practical lessons that can be gleaned from realizing that you've done something wrong. As Real Business reports, many great entrepreneurs, like Henry Ford and Richard Branson, have grappled with failure in one form or another — what sets them apart from the rest is their ability to take failure and use it to fuel their next big idea.
SIGN UP FOR THE THRIVE NEWSLETTER