#1 rule of successful failure: Fail early

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The sad truth is that 9 out of 10 startups fail. Although you may think otherwise, your fledgling venture may become one of the nine. Good news is that you can fail successfully – and reap benefits from doing so. The first rule of successful failure is to fail early.

Each of us has responsibility to thread very carefully between relentless pursuit of our venture’s success and being realistic about the venture’s true potential. It takes a great deal of self-restraint to silence the inner optimist, visionary and firm believer in one’s idea. It is not easy to turn our back on the idea, which led us to leave our jobs, exhausted us physically and financially and/or made us borrow money from our families and friends. It is hard to acknowledge that our entrepreneurial dream was just that – a dream.

However, when things haven’t been going well for a while, it is imperative for us to be brutally honest with ourselves. We need to stop day-dreaming before our dream turns into a nightmare. Don’t leave the decision to close the door until the last minute. Leave yourself enough time (and cash) to fail well.

  1. Don’t go beyond your personal minimum: Leave yourself enough time and money to keep you (and your family) afloat for long enough to find a new job and source of income. Leave yourself at least three-months-worth of cash to pay your bills.
  2. Treat your employees fairly: Give employees heads up so that they have enough time to find new jobs. Pay them. Pay their insurance. For extra points, help them find new jobs. If you treat your employees well, they are more likely to come work for you in future.
  3. Don’t jeopardize other businesses. Recognize that other businesses (and their owners and their employees) might be dependent on your venture’s existence. Treat them as you wish they treated you if they faced the same issue. Pay your suppliers. Deliver to your customers. Maintaining your credibility and reputation in the industry will be key for your next career move.
  4. Part with your investors well: If you borrowed money from non-financially-savvy friends and family, consider paying them back from your future earnings. The professional investors knew what the odds were when they decided to fund your venture. They took the risk that your company might not be the one (of the 10) that succeeds. They are used to failure. They will likely understand. Explain your actions. Share your learnings. Give them enough time to digest it and react. If you treat them well, they are more likely to invest in your next venture.
  5. Be positive: Frame your story as a valuable – perhaps even life-changing – personal and professional experience. You surely learned a great deal by launching, building and closing your business. Deliver a happy ending – one that you could be proud of. Mindset matters.

I’m aware that this is easier said than done. However, treating our families, employees and business partners well is not only ethical. It is also a smart thing to do. If we treat them fairly, they are more likely to support our future business endeavors. So let’s not burn the bridges. Let’s leave ourselves enough time to fail well. Let’s fail early.

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4 thoughts on “#1 rule of successful failure: Fail early

  1. Thanks for your post Helena! When reading it, two thoughts came to my mind:
    – It really takes a lot of discipline to follow the steps you are describing instead of trying harder and harder to make the dream come true. So I guess that as soon as you start your new venture, you should ask yourself whether you are confident you’ll be able to stick to the hard stops you’ll define or you need someone in your team or even external to the venture to help you see the reality when things do not go so well. When it’s hard to self-control, I think it’s crucial to have someone ask you: “Do the data really look good?” like in the Dinr case.
    – Acceptance of failure is critical as a first step toward failing well. In some cultures, failure is really not well accepted. Leaving one’s ego aside can help accepting failure and I do think that working toward mentally accepting failure is essential to decide to fail early and well.

  2. Thank you Helena for your post! While “if fail, fail early” is true, I found it quite contradictory to think about the perseverance we need when we do our startup, and wondered how can we draw the line when we decide we should persist vs. we should “fail well”. Here are my 2 cents added to this post:
    (1) Know your risk profile well. For some, it is okay for them to burn extra money to push a further mile through. For some, there would be a point your intuition tells you this is too risky for you to go on. There is nothing wrong which options you take, but just be honest to yourself when red flag arise.
    (2) What is your alternative. Analyze your situation as objective as possible when things go wrong, lay out the options that you have, as well as the pros and cons for each situation. Some people have a well-paid job to go back to, but it’s the only option left for some. Some has more funding sources they can tap into to get through the tough times, whereas some would be in a even more dire situation if they take on additional debt. Maybe in the end, the decision you made is from your gut, but at least by laying out the facts, your decision is a more informed one.

  3. Thanks for the post! I agree that failing early is optimal. But, what does early mean? And how do we know when is the best time to fail? How do we know when we are unsustainably unable to pay our partners/suppliers/employees?

  4. Nice post, Helena. I think your points on failing well are solid. In terms of failing early, I think I would add that a founder should not try to drag on the inevitable. As ambitious and “crazy” as founders can be, I think deep down you know when the business or team is not working and rather than prolong what is likely to be a doomed scenario, it is better to fail early and reduce the damage. If you cannot see any hope in turning around your business because at the end of the day the idea is not good or the market is not there, then I think it is better to stop wasting yours and other people’s time and money. As you said, it is wiser to return whatever money is left, mend the relationships, and take some time off to reflect on what went wrong.

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