Failure

edison

For most people, failure feels like a colossal mistake, potentially leading to the demise of a critical component of your life. Chances are something unforeseen negatively affected your situation, or maybe you didn’t recognize something that was critically important. The reality is that failure simply means that you tried something that didn’t work. Thomas Edison understood failure is not necessarily a negative outcome, when he stated, “I haven’t failed I just found 10,000 ways that don’t work”.

A year after I graduated from college I decided to start a business. My goal was to become a millionaire by age 30. I found a maintenance person at my apartment complex that could build a house from the ground up and do every trade himself. I knew many realtors in town so I decided to market his services. We got so busy that we both quit our jobs and pursued it full time. The business expanded to over 20 employees. That’s when the challenges began. I needed people to oversee the work. That forced my cost structure to rise. My insurance company reclassified me for workman’s compensation coverage, causing the already hefty premiums to double. I could no longer control the purchasing of materials because there were too many jobs happening at once. Employee theft became an issue. The nail in the coffin: I grew out of the niche I was in. I was no longer profitable on small construction projects because I had too much overhead. I couldn’t take on larger projects because I didn’t have the requisite experience to sit for the General Contractors’ exam. My worst nightmare was playing out. I was failing.

As I went through the activities of dissolving the business I became very depressed. I just couldn’t handle the fact that I was a failure. I remember a conversation with my mother where she asked me what I learned from the experience. After giving her a 45 minute dissertation on what went wrong and what I should have done differently, she asked me if I could have obtained that experience in business school. Learning about business in a classroom versus living it real life are two very different experiences. Most of us forget the majority of what we learn in a classroom shortly after the exam. You never forget your real life experiences, especially the difficult ones. That was the best education in business I’ve ever received. It also served as the catalyst for me to begin following my passions in life.

Learning from your experiences: Every successful person I have ever met has had their share of failure. The difference between becoming successful and remaining a failure is the ability to take responsibility, rebound, and learn from the failure. The successful person does a postmortem on the experience to determine what went wrong, then takes that knowledge to their next project. They don’t repeat their mistakes.

The perpetual failure lives his life in denial. He blames others for his challenges and refuses to take responsibility for his missteps. He either gives up completely and retreats to a situation he deems as safe, or he tries again and makes the same mistakes. This is because he is unwilling to own up to his errors. In his mind it’s easier to bury his head under a pillow and blame everyone else. It can be painful to take responsibility for failure. Unfortunately, in the end, he learns little through the experience and is destined to repeat it.

Fear of failing: Most people fear failing so much that they don’t ever take the shot. The successful person understands the relationship between risk and reward. A big risk that goes awry results in a failure. A big risk that works brings success. In order to build a successful business you have to take risks, but those risks should be evaluated based on their return potential. Starting a business with low margins (the percent you make on your products or services is low) and high operating costs, has a low probability of success. It may be a bad idea to bet your life savings on that type of opportunity. If you have expertise in a high margin business with low entry and operating costs, it makes more sense to take the shot.

Bottom line: it is very difficult to become successful without taking some risks along the way. Think of the amount of risk you can take in terms of a bank account. Let’s call it a risk account. There’s only so much risk you can take on without emptying the account. The empty account is failure. Exponential growth on the account is success. Use your risk budget wisely. Align your business decisions with this mindset and you dramatically increase your chance of success.