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Three Questions Entrepreneurs Should Consider for “Failing Well”

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Every entrepreneur knows that there is a very high chance their startup with fail. Some failures are fatal, leaving entrepreneurs with no way to recover financially, personally and morally. Other failures are constructive and can pave the way for success by making entrepreneurs stronger and more ready to succeed in their next entrepreneurial venture. In the latter case, one can say that the entrepreneur failed well.

In my opinion, failing well means earning and maintaining respect of all stakeholders involved in the entrepreneurial ecosystem: Family, Investors and Employees. Accordingly, I identified three questions entrepreneurs should ask themselves and assess when taking major decisions and actions for companies that are on a path to failure

1. Will my decision compromise my family’s critical living requirements?

Family, including wife, kids and parents, is the most important stakeholder to consider before deciding to make riskier bets in a startup. An entrepreneur should realize that even if their family is supportive, they are going through a period of uncertainty and stress that is difficult to sustain financially and morally. I believe entrepreneurs should set a threshold, a safety net, which represents the maximum that they are willing to compromise and that should not be crossed in all circumstances. For example, taking huge debts and putting one’s kids’ education or personal house on the line is very risky and may lead to irreversible consequences that will scar entrepreneurs and their families forever.

2. Would investors be willing to invest in me in the future?

Investors need to trust that entrepreneurs were perseverant and did everything they could to save their startup from failing.  Even if they don’t end up making a return on their investment or earning their money back, they need to see that entrepreneurs valued their money and treated it as their own. Accordingly, open and regular communication is extremely important to maintain a good relationship with investors. Some entrepreneurs even share a post-mortem with their investors, explaining what went wrong and how they would do things differently next time. This is critical to maintaining a good reputation in the market, where word of mouth can make or break entrepreneurs

3. Will my employees feel they have been treated honestly and fairly?

Founders have a tendency to hide “bad” information about the company from their employees to avoid distraction and to control the spread of rumors. However, entrepreneurs owe this transparency and honesty to their employees, who believed in their ideas and decided to take a risk with them. For example, Curt Shilling sent an unexpected email to his employees one night telling them that they were fired. Those employees trusted Curt and had made big sacrifices for him. This type of behavior creates frustration, leading to a loss of trust and respect that is almost impossible to regain. Most importantly, employees should believe that they have been treated well and fairly. Employees talk and share personal information such as salary and benefits details. Entrepreneurs should be very careful at treating all employees fairly when taking decisive actions.


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