Failure: The Secret of My Success

While most entrepreneurs dread the failure of their businesses, sometimes it's their best option. Here's how to know when to throw in the towel, and the lessons that failure can teach.

There are three things to know about failure: 1. It happens. 2. It can be destructive in ways you've never imagined. 3. Believe it or not, there's a right way to do it

"Do you believe in miracles?"

Jeff Schwartz is proudly demonstrating his company's most popular product: a framed photograph of the U.S. hockey team defeating the Soviets in the 1980 Olympics. Push the button at the bottom of the frame and Al Michael's memorable words come crackling out of a tiny speaker. For a few fleeting seconds, the Miracle on Ice comes to life.

It's not quite enough to give you the chills, but almost. The company's modest offices, near the breakers in the leafy beach town of San Clemente, Calif., are festooned with these talking frames--tributes, mostly, to sportsmen persevering and triumphing in the face of impossible odds. There's an echoing Lou Gehrig ("I consider myself the luckiest man...man...man...on the face of the earth...earth...earth"), Bobby Thomson, and Jackie Robinson. Schwartz circles around his desk to demonstrate another of his favorites. But this time, when he presses the button, no sound comes out. "The batteries must have died on these things," he says brusquely, "they've been sitting here so long."

It's a jarring reminder of why we're here--not to play with the merchandise (which is undeniably appealing) but because Jeff Schwartz's business, Remarkable Moments, has failed. Schwartz, 43, is standing amidst the accumulated detritus of five years of unsuccessful endeavor: empty frames, piles of inventory, and snarls of partially disassembled sound-editing equipment. Out back, his wife, Sandy, is about to start loading things into a Ryder truck to be hauled off. It is, in a macabre kind of way, a remarkable moment.

But what's really bugging Schwartz isn't that he's pulling the plug on his dream. It's that he didn't pull the plug long ago--before he had gone almost three years without a salary. Before he had burned through another $100,000 of his own money (the dividend of a previous successful company he had sold). Before Sandy quit the PTA and other community activities because of the business's demands. Before he had run out of money even to pay his two children for their efforts. Before he had raided their college funds. "And the biggest thing I've lost isn't the money. It's five years or so," broods Schwartz, his eyes downcast. "I could have played golf and watched TV for the last five years, and I'd have more money than I do now."

He means that literally. He's done the math.

This perplexing reality has thrown Schwartz into a philosophical crisis of sorts. Like everyone else, he'd been schooled in the Vince Lombardi-style slogans that cloak entrepreneurial lore. That winners never quit. That quitters never win. That, in the oft-quoted line from the movie Apollo 13, "failure is not an option." Yet now experience seems to have taught him a different lesson. "The blinders-on, full-speed-ahead mentality sounds great, and it really does motivate people," says Schwartz. "But the sad truth is that 'never give up' isn't always the right thing. For people like me, it means we burn through our savings....My failure wasn't in taking the risk to start the company; it was when I let it bleed my family dry." Pausing, he asks: "When does your ally--tenacity--become your worst enemy?"

Call it a genetic compulsion, a defensive reaction, or simple entrepreneurial optimism, but the reality is that most business owners refuse to contemplate the possibility of failure. The word is all but missing from their vocabulary. Even in the vast canon of management literature, the topic is glaringly absent. "There're no books on it--nothing on how to shut down a business, on how to deal with failure personally," notes James Kilmer, who went to the bookstore in search of guidance when he knew his food-processing company was going bad. "The best I could do was Chicken Soup for the Soul."

But do not be deluded: failure is an option, and in some instances it's the wisest option there is.

Not that the spirit of reckless persistence doesn't play a powerfully positive role in our economy. It does. It's what enables ordinary people with a dollar and a dream to overcome stupid-seeming odds--in ways that are routinely celebrated, even glamorized, by the likes of Inc. Yet too little acknowledged is the flip side to this coin: that the never-say-die spirit is also what wrecks lives, splinters families, and spoils people's chances for future entrepreneurial success. It makes failure--already painful--potentially ruinous, both financially and psychologically.

And that's a shame, because failure is a vital, inseparable part of the entrepreneurial arc. Such luminaries as R.H. Macy, H.J. Heinz, and George Westinghouse all once stumbled. With U.S. business failures on the rise (last year an estimated 83,384 companies closed their doors owing creditors money), the ability to endure and overcome failure has arguably never been more important. For this article, Inc. interviewed scores of failed entrepreneurs--some who've bounced back, some who haven't--soliciting their collective wisdom regarding the f-word and its consequences. Their message: Company builders, like good cyclists, need to know how to crash well. They need to know how to fail.

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