A line that I try to live by:
I would rather try, and fail, than to walk away and regret never having tried at all.
You’ve no doubt heard the statistic that X number of new business fail in X years. Maybe you’ve heard that the number really isn’t that high, or maybe you’ve heard it’s actually very high. To clear the confusion, according to the US Small Business Administration site:
Starting a small business is always risky, and the chance of success is slim. According to the U.S. Small Business Administration, roughly 50% of small businesses fail within the first five years.
The numbers vary by industry, of course. On the Web, they’re probably much higher—say 60-70% in the first year? (Five years in Web time is a lifetime and the barriers to entry are very low). But the conclusion is the same: You’re more likely to fail than to succeed (especially on the Web).
So my thinking is, if it’s inevitable, why fear it? Embrace it. And go forth with faith and gusto, as Jeremy Liew of Lightspeed, James Hong of Hotornot.com, and Robert Young of GigaOM all advise. In a nutshell: Failure is an option, have the balls to try, and bankruptcy gives you the opportunity to fail and start over again.
Young’s point about bankruptcy is actually a very significant one. “The ability for a U.S. entrepreneur to go bankrupt is actually the most important element of this country’s economic success and wealth,” he writes. How does bankruptcy do this exactly, you ask? According to Wikipedia, the purpose of bankruptcy is:
- To give an honest debtor a “fresh start” in life by relieving the debtor of most debts.
- To repay creditors in an orderly manner to the extent that the debtor has the means available for payment.
That means if you still have debt, but are out of money, those debts can be erased. This simple rule is part of what makes businesses thrive in the US. In The World is Flat, Thomas Friedman argues that if a nation wants to improve its economy and increase the number of jobs, it needs:
…a regulatory environment that makes it easy to start a business, easy to adjust a business to changing market circumstances and opportunities, and easy to close a business that goes bankrupt, so that the capital can be freed up for more productive uses.
If you are starting your business in the US, you are in luck. You are in such an environment. Happy day!
However, this doesn’t mean you should go about your business in a haphazard fashion and take crazy risks. Failure may be inevitable, but at least be smart about it. Learn to build for it. Paul Hawken advises in his great book Growing a Business:
If you conceive and create a business where everything has to go right, one error, one mishap, can ruin a lot of good work. If you conceive a business where twenty serious mistakes could occur, and then you create safeguards to deal with some or most of these possibilities, you are creating a survivor. In the beginning, survival is more important than success. Survival is staying on the field, playing the game, learning the rules, and beginning to grow.
Another great book about managing and taking calculated risks is Anthony Iaquinto and Stephen Spinelli Jr’s Never Bet The Farm. It presents fifteen common-sense principles that can serve as helpful reminders in times of crisis, such as Principle #9: Don’t Spend a Dollar When a Dime Will Do, and Principle #11: Only Fools Fly Without a Net.
So there you have it. Don’t be afraid to fail. Embrace failure. Go forth with faith and gusto. But be smart about failure. Learn to build for it. And don’t walk away and regret never having tried at all.