These entrepreneurs have gone to the brink of failure--and have turned things around. Here's how.
Tipping over and falling down isn't just for toddlers.
Even the most intelligent and able-bodied of us take a tumble sometimes--although here's hoping all our grown-up tumbles are slightly more metaphoric (and don't involve as many skinned knees). Whether you're talking about a baby-sized trip-up or a Pets.com-style tumble from glory, there's something about experiencing a failure that takes you to unusual territory that's wide open for self-exploration, learning, and re-envisioning your problem.
A group of people who seem particularly adept at learning from their mistakes are founders of small companies. Here are three of our favorite example of entrepreneurs who've gone to the brink--and have turned things around for the better.
It started with an imported idea. With her 40th birthday in the rear-view mirror in 1999, Robin Chase had taken a year-long break from the workforce to care for her three children. Despite her strong desire to become an entrepreneur, she'd never yet been able to find an idea that didn't eventually reveal a fatal flaw. Then, the big idea she'd been looking for pretty much pulled up and parked in front of her at a cafe in Cambridge, Massachusetts.
A friend named Antje Danielson had just returned from a trip to her native Germany, and she was full of stories about how quickly things were changing overseas. She'd seen a bold new business in Berlin: A rental-car company that offered cars by the hour instead of the day or the week. Neither Chase nor Danielson had worked in the automobile industry. Chase didn't even like to drive. Yet Zipcar, the company the two women cofounded out of Chase's home, is now the world leader in car-sharing. It virtually created the industry in the United States.
What went wrong? Zipcar launched in 2000 with a bang--acquiring its first customer just moments after the website went live, and getting favorable mentions in the Associated Press and on NPR after reporters saw the company's green Volkswagens touring around the Boston area. Creating a new industry had meant creating financial models. The company's plan was to lease cars starting in Cambridge, and charge customers a monthly membership along with hourly or daily rates. However, just a few months after the company launched in 2000, Chase analyzed the hard data she'd accumulated and saw that some her calculations had been wrong.
Zipcar wasn't charging enough to break even, and so she was left with little choice but to raise rates. The brilliance of failure. It was a moment of truth when Zipcar had to send a notice to its early adopter members, letting them know that rates would have to go up right away, and why. Chase was forthcoming about the miscalculation, and she was gratified to find that customers generally understood and accepted her reasoning. In short, Zipcar lost at most a handful of customers, who were replaced almost right away. Chase recognized had that she was probably her own ideal customer---an urban, cost-conscious consumer who didn't like the hassles of car ownership but who wanted the freedom to travel by automobile when she needed to. But the response to her fast pricing change was early reinforcement that she had already built Zipcar into a company with fantastic customer loyalty. Her customers didn't just see Zipcar was a way to get around town, but something that might approach a way of life. Lessons learned. In the process of building Zipcar, Chase became a respected voice on transportation policy and the environment. She left the company in 2004, and Zipcar went public last year. She's in Paris now, launching her next new company--Buzzcar, a peer-to-peer car sharing service.
When I talked with her last year, she marveled that she'd convinced an influential think tank to reevaluate its entire position on a transportation policy for the United States government. "I just got this report and recommendation," she said. "They even say---this is 180-degrees from what we were going to do. Billions and billions of dollars, and I just changed how it's going to be done. I think that's way cool." --Bill Murphy Jr.
NEXT: Fab.com's brilliant mistake
Tim Donnelly is a freelance writer and managing editor of Brokelyn.com. His work has appeared in Billboard, The Atlantic, Thought Catalog, and The New York Post. @TimDonnelly
Nicole Carter was previously a reporter and web editor at the New York Daily News, and her work has also appeared in Consumer Reports magazine. @ncarterinc
Bill Murphy Jr.: is a journalist, ghostwriter, and entrepreneur in Washington, D.C. He is the author of Breakthrough Entrepreneurship (with John Burgstone), and is a former reporter for The Washington Post. @BillMurphyJr
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