Every entrepreneur has made a series of mistakes or been subject to failures along his or her entrepreneurial journey. These setbacks, though painful, will teach you more about business than any textbook, lecture, or mentor ever could. Plus, they are great fodder for conversations at cocktail receptions and on panel discussions.
I am proud to have learned such a great deal from my failures, and the fact that I get to share them — and, more important, the hard-knocks lessons learned — with a worldwide audience is a real thrill. After all, what’s the point of ending up in frivolous litigation, nearly losing your shirt, pitching VCs for tens of millions of dollars wth no revenue model, or being forced to move back in with your parents if you can’t have a few laughs as a result, right?
And with that, here are 10 lessons I learned from past failures that were well worth the price of admission (well, after I survived them, that is). Feel free to check out even more in Never Get a “Real” Job.
- No revenue, no business. Period. Build a sustainable business for yourself, and not one based on hypothetical acquisitions or imaginary investment capital. If your business can cut it, you may be able to buy other companies down the road or raise VC. But treating either path as a guaranteed strategy is simply stupid. Bottom line: Stop thinking about many tomorrows from now, and focus on today. Cash flow, or die.
- You are not special, a winner, or guaranteed squat (and neither is your business). If you are human, guess what? You are still bound by the rules of Darwin’s theory of evolution or, at the very least, Murphy’s Law. The worst thing you can do is fall for your own b.s., so stay focused, stop thinking you are a winner because you’re excited and think your idea is brilliant, and go kick some real ass.
- How many things can you do perfectly? If your answer is anything other than one, and you are a small start-up on a shoe-string, guess what? You are an idiot. Rome wasn’t built in a day, neither was Google. Both were built brick by brick, scaled and then, and only then, did they diversify. Keep your business plan simple, because if it’s not simple, you’re dead.
- Traditional business plans will bankrupt you. Don’t get stuck in analysis paralysis! Business planning is not a revenue generating exercise. Execution is where the money is at. Write something short, sweet and to the point and get on with it. I always preach about my One Paragraph Start Up Plan as the best way to get started.
- The worst case scenario is the only scenario. If you project 100 customers, you might get 10. If you predict a deal to close within 2 months, it might close in 12. The point is, you always need to be thinking about back up plans — and sometimes — back-up plans to your back-up plans. Don’t rely on one way to do something, think about multiple paths. Cover yourself by thinking about alternatives at every turn and you’ll become a much stronger decision maker.
- Divide your “lowest” financial assumptions or expectations by 4. Anything you think you will earn before you execute, well, probably won’t happen. Financial forecasts are like little gremlins that sit on your shoulders whispering sweet nothings in your ear about upward climbing bell curves. Don’t get stuck on a grandiose financial milestone. Focus on growing organically and covering your basic life expenses before you worry about a six-figure salary or 10-digit company revenues.
- Strategic partners are not always good ideas. Before you bring on anyone as a business partner, determine if truly “partnering” is the best option. Decide if alternatives such as sharing revenue or doing a joint venture are a better fit. Make sure you know everything about the person you wish to partner with, from their political backgrounds to their business ethics. And if you decide to go ahead and bring on a partner, be sure to create an operating agreement that clearly states what happens in every possible outcome — from a partner leaving to a partner dying.
- Proof of concept isn’t optional. No one is going to hand you a wad of cash and say, “Here, go follow your dreams and build the next big company.” Banks rarely — if ever anymore — lend to start ups. Angels and VCs won’t give you a second look. Bottom line: money people don’t care if you are alive or dead until you are in the marketplace — and thriving. Do not waste a second on an idea that you truly cannot get off the ground in some way without someone else’s resources. Think smaller before you try to go bigger. Get rid of the “phase 3” aspects of your idea before you can get “phase one” out the door. If you find yourself saying I can’t launch my business without the whole ball of wax day one, hit yourself over the head with a blunt object until you gain some clarity.
- Business growth happens in real time. You may want to get past all of the start-up crap, but you can’t get to B until you get past A — and A takes time. There are no six-minute start-up tricks or ways to get to your first million any faster. It takes time to build traction, brand awareness and a consumer base. Trying to get to B faster will only lead you to a weak A, and a weak A can take down the whole business.
- No matter how successful you are, accept that you will fail again. Failure is good. It will be your guide to smarter, better decisions. The faster you realize that your business will never be perfect and there is no such thing as smooth sailing, you’ll grow as a leader as a result.