Entrepreneurs tend to have a complicated relationship with failure. On one hand, it’s a necessary part of the creation process. Innovation of any kind is almost always a direct result of multiple failed attempts. On the other hand, the thought of failure is something that can influence your decisions, bring you heartache and keep you up at night.
In any endeavor, failure of some kind is inevitable. Everyone will experience it in one form or another, but when dealt with productively, failure can propel an entrepreneur to unexpected levels of success.
Start with self-awareness.
As with most things in life, honestly comes first. Failures can come in all shapes and sizes, and it’s easy to gloss over or downplay the small losses as a daily part of life. I’ll admit that I’m guilty of this myself.
Early on at BodeTree, we built a product we were proud of and that we felt served the needs of small business owners. We received positive reviews, media coverage and even managed to sign several large partnership agreements. The only problem with our story was that once they signed up, a huge number of users failed to progress through the system we designed. We were perplexed. After all, the setup process was intuitive and fairly quick. All they had to do was sync with their QuickBooks system, and then they were ready to go. We knew there were about six million QuickBooks users in the U.S., so why were so few taking advantage of our solution?
What became clear to us was that far fewer than six million people used QuickBooks on a regular basis. Intuit’s figures were technically accurate, but reflected people who used any part of QuickBooks, not just the bookkeeping features. We called this realization “The 90% Challenge,” and it became a central tenant of our company. This revelation meant that we had made a big bet based on the wrong information. We depended on the false reality that people had solid accounting systems—that they actually used— in order for our product to work. Our entire business model was built on it. Overnight, we were forced to acknowledge that our addressable market was less than one-sixth of what we thought it was. For my team, the temptation to fall into despair or desperately cling to earlier assumptions was strong. Ultimately, I knew we had to accept reality for what it was and live to fight another day. Once we were honest with ourselves about the problem we could turn our focus towards solving it.
Accept reality and adjust accordingly.
Once you’ve come to terms with your failures, the next step is to adjust accordingly. At BodeTree, we knew that our market was still small businesses and that our earlier QuickBooks-centric model wouldn’t work at scale. We decided to remove our dependence on QuickBooks by connecting directly to financial institutions to get our data. As a result, our addressable market went from fewer than one million small businesses to about 30 million overnight.
Our massive new market opportunity, however, did not come without another set of challenges. To connect to this pool of potential small business customers, we would need to ask for online banking logins, which, despite our rock solid security, would inevitably cause some hesitation. Even worse, the development work required to make this happen would cost upwards of $100,000. While we had cash in the bank, any significant spend is cause for concern when you’re a startup. Despite the challenges, we knew what we needed to do and opted to move forward.
I knew that the entire organization had to rally around this adjustment if we were going to be successful. To accomplish this, I made sure that every key stakeholder had input into the decision process. In doing so, I removed the potential for dissent and second-guessing after we started development. We moved swiftly to rebuild the core elements of the system and fix the recognized problems.
Keep moving forward.
The absolute worst thing you can do when you encounter failure is to let it get in your head. The creeping doubts, insecurities and negativity that often accompany failures big and small can act like a cancer in your organization, sapping your energy and destroying your momentum.
So much of business comes down to psychological momentum, which is defined as a state of mind where an individual or teams feels things are going unstoppably their way. It’s a concept well known in the world of sports. According to the American Psychological Association’s Review of General Psychology, 92 percent of football coaches believe their performance is “crucially determined by momentum.” Initial success frequently leads to more success and conversely, failure tends to lead to more failure.That’s why it is so important to acknowledge failure, adjust accordingly, and move on. Dwelling on the past and letting it influence the future is a recipe for disaster. Learn from your shortcomings and always keep moving forward. If you can deal with life’s inevitable failures more effectively, you may start to find that they can become stepping-stones to greatness.
Chris Myers is the Cofounder and CEO of BodeTree
, a web application designed to help small businesses manage their finances.