Every year at this time, we celebrate entrepreneurial success, and I'm all for it. Making the Inc. 500 isn't easy, and those who do it deserve our admiration and praise. But I also think that you can't really appreciate success unless you've known failure.

Let me tell you about someone who came to me for advice about six months ago. I'll call him Keith. At the time, he was about to open a yoga studio and was brimming with enthusiasm. But when we met five months later, he was clearly depressed.

Everything had gone wrong, he told me. His partner had lied to him: She'd said the money they'd invested would carry them for six months, but it was gone after four. The yoga instructors he'd signed up hadn't been able to bring in as many students as they'd estimated. The publicist they'd hired wasn't working out, but his partner refused to fire her. Meanwhile, he was putting in 12-hour days, seven days a week, and the partner seldom came in to help, even though doing so was part of their agreement.

Keith could see that the business was going to fail. Unfortunately, that was the one possibility for which he was totally unprepared.

What scared him most was the shame he knew he would feel. He'd made a big deal about the studio's recent opening. What would he tell people now? What would his friends think? And what should he do?

I understood what he was going through. I'd had similar feelings when I put my first company, Perfect Courier, into Chapter 11. My identity was totally wrapped up in the business. People respected me, I thought, because of its success. So when the company failed, it was my failure. I didn't know how people would react, but I was deeply embarrassed. So I hid out for a while. A couple of months went by before I would even go to a restaurant with anybody other than my wife. It took a lot longer for me to recapture the pride I'd felt when I was riding high with Perfect Courier.

Looking back, I realize that this painful experience ultimately led to the good things I've been able to do since. But I couldn't see that at the time. You never can.

I figured that, like me, Keith was paralyzed by the unknown. So I drew him a decision tree. The first decision: Stay or leave? I said, "If you leave, there are no other decisions to make about this business. What happens if you stay? You might succeed or you might fail, right?" He nodded. "What happens if you succeed? I can see that you're very unhappy. Can you get along with your partner for the next five, 10, 20 years?" "No, I can't," he said. "So you're telling me that, even if you stay and succeed, you'll be unhappy." He suddenly brightened. "I didn't think of that, but you're right," he said. "I'm going to be unhappy even if we succeed."

I emphasized that I wasn't telling him what to do. It had to be his decision. But I said he should bear in mind the valuable lessons he'd already learned. The first was, you need to know someone really well before deciding to launch a business with him or her. Second, it's your responsibility to figure out how much money you need to start a business; you can't rely on what someone else tells you. Third, most entrepreneurs tend to be overly optimistic in their sales forecasts while underestimating their expenses. Keith was no different. There are undoubtedly other lessons, I said. They'll come in handy the next time he starts a business.