Failure: The Secret of My Success

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Likewise, few company owners reckon with the possibility of failure until it's irrevocably upon them. OK, so they might acknowledge its existence on some abstract level. But most are no more in touch with the reality of failure than, say, the average 16-year-old is in touch with the reality of death. Typical is the comment of Joe Burnieika, on whether he knew he could lose his house when he started his Boston public-relations firm: "Did I understand that intellectually? Yes. Did I ever think it would come to that? Never. Absolutely never."

Failing well, part one

Frequently, of course, it does come to that. Failure happens. So how does one fail intelligently? We took that question out into the field. Here's what we came back with.

• Don't leave your family in the dark. Colleen Campbell describes her marriage to her entrepreneur husband, Mike, this way: "We're in a two-man race car going very quickly--and I'm blindfolded." That was fine, she adds, "until the rear axle came off."

As harrowing as failure can be for business owners, it tends to be still more so for their spouses. "The most traumatic impact is on your wife, because everything is out of her control," says James Kilmer, whose Remlik Foods closed in 1996. "She doesn't know what's happening."

Hence, say experts, communication is of the essence. "The first thing you should do is bring the family into the sphere," says David Ferrari, whose Argus Management Corp., based in South Natick, Mass., counsels companies that are on the cusp of going under. All too often, he says, CEOs feel they must protect their families from the scary truth--or deny it outright. "I had one client whose company was in desperate shape," says Ferrari. "He said one day, 'I've got to leave early today because my wife and I have to go to the country club. It's a formal.' I thought, 'What an idiot this guy is. His wife doesn't even know his company is about to go out of business." Worse still was the time a bank sent an appraiser to a client's house to begin foreclosure proceedings, and the unknowing wife answered the door. Her reaction, says Ferrari, could have been predicted: "She went berserk."

• Seek outside support. When Mike Campbell's software business hit the skids, "friends didn't really understand," he says. "The general reaction was, 'Isn't that pitiful? I could have told him. He should have had a job like the rest of us."

But there is support out there. You just have to find it. Realizing that his food-processing company was swiftly approaching its demise, James Kilmer set up a lunch with several local entrepreneurs who had failed, "so I knew what to expect," he says. "One had had some problems dealing with banks and secured lenders. Another guy had bounced back. It gave me hope." Local Small Business Development Centers (SBDCs) can also provide a helpful word and a sympathetic ear.

• Think in terms of opportunity cost. Amar BhidÉ, a Harvard Business School professor who studies entrepreneurship, has this advice: Fail hard, and fail fast. "The living-death kinds of businesses that drag on for 5 or 10 years are worse than failing outright," says BhidÉ. "People waste not so much money as time. The longer they hang in there, the more costly it becomes in terms of personal and opportunity cost."

The thing is, most entrepreneurs find it hard to conceive that other opportunities exist. "You're so focused on what's happening, you think there's nothing else out there," attests Mike Campbell. "You think you're facing death." After his business failed, though, his perspective shifted dramatically. His most valuable asset, he realized, wasn't the particular product he'd been trying to sell. It was his own capacity to start and run a business--an asset that was readily transferable to his next start-up. Says Campbell, "You have to look at you as the venture."

• Establish a turnaround time, and stick to it. The 1996 Mt. Everest tragedy occurred, in part, because the climbers failed to heed the 2 p.m. turnaround they'd set for themselves--the point at which, no matter where they were, they were supposed to head down the mountain. Jeff Schwartz says he made the same mistake: "I'd say, 'I'm going to give it another year, and if I'm not profitable by then, I'm going to walk away from it.' But at the end of the year, even though I wouldn't be profitable, something new would pop up." Like the vague but tantalizing prospect of a huge new order.

Ironically, Schwartz notes, part of the problem was that his product--the talking picture frames--elicited such passionate responses. There was the letter from Babe Ruth's granddaughter ("You make a wonderful product and it is a fine tribute to my grandfather, Babe Ruth! Everyone who sees mine is fascinated!") and the endorsements from Wayne Gretzky and Bruce Jenner. "It's real hard to pull the gun out and shoot the business when you keep running into these things," says Schwartz. He wishes he'd paid more attention to the feedback that really counted: his numbers.

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