I am a serial entrepreneur in the food business. Over the past 11 years, I've started five pizzerias, a bakery, and a bagel shop. I opened my latest restaurant, a wood-burning pizzeria, last November. It ended up a spectacular failure. After four months of bleeding cash, I closed it down. The good news is that I have my other businesses to support me. Nevertheless, closing the business and losing the money hasn't been easy. How can I pick up the pieces and move on?
-Ian Gurfield, Madison, Wisconsin
When I spoke to Ian, he explained that he had been wildly overoptimistic in his sales forecasts for his new place. Actual sales came in 35 percent below his most conservative projection. By the fourth month, he could see that it would take a long time and a lot more money to reach breakeven. Instead, he decided to cut his losses.
I asked him what lessons he took from the experience. He said the restaurant had been a "passion project." His other pizzerias sell takeout pizza by the slice. The new one was a sit-down restaurant featuring gourmet pies baked in a traditional wood-fired oven imported from Italy.
He'd long dreamed of opening such a place, and when an ideal space for it became available, he jumped at the opportunity. The failure of the venture, he said, had taught him he should not let himself get so swept up in his passion for a project that he underestimates the risk involved.
I told him that was the wrong lesson.
In fact, Ian did nothing wrong. He started a business, and it failed. That happens. He was smarter than most entrepreneurs--including me--in that he got out early. When my first business, Perfect Courier, went bust in 1988, it took me three years to emerge from Chapter 11 and move on.
I told Ian not to be afraid of following his passions. Rather, he should realize that everything he touches is not going to succeed. That's a hard lesson for some entrepreneurs to learn, especially if they've known only success. But once you learn it, you can begin to take into account the possibility of failure when you try something new.
When Perfect Courier went under, it was because I kept throwing good money after bad until I landed in bankruptcy court. My response was to resolve that henceforth, when I went into a new venture, I'd estimate the investment in advance and allow myself to go 25 percent beyond it but no further.
Ian's situation is different. He branched out in part because pizzerias had become old hat to him. He had grown so good at launching them that he couldn't get excited about doing another one. So he looked for a new challenge.
If he'd considered the possibility of failure, he might have put off launching the restaurant of his dreams and instead spent his limited time and money expanding his chain of existing pizzerias. Once he'd built a substantial platform, he could have sold it or used it as a base to pursue new ventures.
That's the course I'd take if I were starting my entrepreneurial career today. I'd look for a business I could fully master. Then I'd keep replicating and expanding it until I had a platform large enough to support whatever else I wanted to do.
Ian has that opportunity in front of him. Whether or not he chooses to seize it, he can at least move forward with the knowledge that he's just received a valuable lesson. For that, he should be grateful.