Embracing failure as an entrepreneur

We all fail in life – and that’s the way it should be. Our whole lives we’re rewarded for succeeding, given the gold medal or the A-grade, but the truth is that the biggest rewards come when you fail.

Failure is your chance to learn and to grow; to fail less in the future, you have to become bigger and better than you already are. These growing pains aren’t always easy to take, but if you recognise them as an opportunity rather than an enemy, failure becomes a lot less scary.

Let’s take a deep dive into failure from an entrepreneur’s perspective and see if we can learn to embrace our shortcomings, rather than fear them.

What is failure?

First of all, what do we mean by failure? If a customer is 99% happy with your work, but makes one small complaint, have you failed? Is failure an entirely cancelled contract? Or if your business as a whole is doing well, do you chalk individual clients up to experience?

The answer is that there are shades of grey in failure. Just as an exam has a pass mark, you need to learn to set your own benchmarks for success. Devise ways to measure this, whether it’s through customer satisfaction surveys, company revenues or some other metric.

You can choose your own definition of success and failure. You can even set levels – ‘excellent’ for your best performance and ‘very poor’ for your worst, but with ‘satisfactory’ bands in between.

What are you afraid of?

In order for failure to be a significant threat to your business, it needs to have material consequences. Examples include lost clients, lower revenues and profits, and bad reviews or negative word of mouth.

Decide which of these are existential threats to your venture, especially if you’re just starting up a new business: poor reviews in your first months can be hard to recover from.

Try to keep your risk analysis separate from any emotional fear of failure. Again, we’re all programmed by life to be afraid to fail, but no business has a 100% success rate.

By setting your emotions aside, you can take a more systematic approach to addressing the failures in your business, to resolve them faster with less anxiety.

Recognising failure

Not all customer complaints represent a failure on your part. Some (and in certain industries, many) will be spurious attempts to get a discount or refund. Some will be legitimate complaints but not your fault.

Again, by defining what you consider to be failure, you can choose how to react to complaints and other incidents as they arise.

This can prevent knee-jerk reactions such as giving a customer a full refund over a minor issue that was beyond your control (e.g. late delivery by an independent courier).

It’s sometimes hard to get perspective when you’re in the middle of an incident or when an angry supplier, customer or stakeholder is on the phone – having a clear notion of failure beforehand can help you to avoid making costly snap decisions.

Dealing with failure

When you encounter an incident that meets your predetermined criteria for ‘failure’, put your plans into action and take a dispassionate approach to resolving the problem in a positive way.

This might involve dealing directly with an unhappy customer, but can also include some more general responses, for example:

  • Damage limitation
  • Customer service/complaint handling
  • Reputation management
  • Changes to processes/culture
  • Supply chain improvements

It all depends on what went wrong. If the problem is with physical goods supplied by a third party, for instance, it may be out of your control to improve the quality of the product; instead, you could look for a better alternative from a different supplier.

Reducing your failure rate

While negative incidents will inevitably occur over the course of your business, it’s good practice to try to reduce your failure rate to a minimum and to use those remaining inevitabilities as learning opportunities.

You can think of failure in three main groups:

  • Foreseeable failure
  • Forecastable failure
  • Unpredictable failure

So what are these groups, and how should your response differ to each?

Foreseeable failure

These are the specific failures it’s possible to anticipate. They might be easily quantifiable (e.g. missing a sales target) and it’s often easier to see how to respond (e.g. make more calls or change your marketing methods).

Forecastable failure

These are the ‘known unknowns’. You can’t necessarily see a specific incident coming, but you can guess that one will arise eventually. There may be a human element that makes these failures harder to pin down, such as a third-party supplier or a customer.

Unpredictable failure

These are the issues that arise out of nowhere, such as a trusted supplier going out of business without warning, or an overnight economic collapse like the 2007-08 credit crunch. You can’t prepare for them, but you can build a robust business with a positive approach to problem-solving, to help you to find a solution in the shortest amount of time.

Best practice for responding to failure in business

Before I finish, let’s put together a checklist for failure in business (how to respond to it, and how to avoid it in future).

  • Predicting failure
    • Identify specific failures you might encounter
    • Predict more general risks of failure
    • Acknowledge some failure is unpredictable
  • Defining failure
    • Set numerical targets where possible
    • Consider negative impacts on your business
    • Know when an issue/complaint is not your fault
  • Responding to failure
    • Deal directly with the issue
    • Remember to deal with reputational impacts
    • Don’t offer costly/excessive compensation
  • Learning from failure
    • Be open to learning from failure
    • Look for the errors you could have controlled
    • Identify repeated issues or patterns in multiple failures
  • Reducing failures in future
    • Apply the lessons you learn
    • Make material changes (e.g. suppliers, processes)
    • Make cultural changes (e.g. workforce retraining)

Implement this business failure checklist and you can reduce your failure rate – and by definition, increase your success rate – while always remembering that some failure is inevitable, and the learning process never ends.