“I don’t like to invest in entrepreneurs that have not failed at least once.” I have heard this statement from a number of venture capitalists. Their reasoning is simple: failure makes you humble, more teachable, and less likely to make critical mistakes next time around. I also hear these phrases from entrepreneurial gurus: “Fail fast.” “Fail cheaply.” Fail often.” Apparently, failure is becoming a badge of honor in the field of entrepreneurship.
Related Book: Fueled by Failure by Jeremy Bloom
I agree we can learn a lot from our mistakes, but I also think we can learn a great deal from the mistakes of others. I don’t think we need a string of failures in order to build a successful venture. During my career as a business consultant I have seen hundreds of entrepreneurs succeed with their first venture. Nonetheless, if you want to join an “elite” group and put a failure on your resume – for whatever reason – here is an easy formula I have observed.
1. Start your venture for the sole purpose of making money.
Don’t have a strong and engaging purpose for starting your business; this will increase the odds that your venture will struggle. It is just too hard to build a company if money is the only driver. Don’t be like successful entrepreneurs who have a purpose beyond themselves: they want to solve a problem, do something they love, create jobs in their city, innovate unique products, or make a difference in the world. A strong purpose gets them through difficult times, attracts like-minded people to their team, and appeals to customers who love their mission.
2. Launch your venture in an area you don’t understand.
Start a business in an industry you know absolutely nothing about. This requires a great deal of trial and error learning, and you will burn through your passion, resources, and team members before gaining traction. But don’t do what successful entrepreneurs do: they have experience in the industry in which they launch their venture. Some have worked in the industry or a related industry; others are frequent and serious users of the products – so they know the industry from the customer’s perspective.
3. Launch an idea, not a true business opportunity.
Ideas and business opportunities are not the same thing. An idea is something you think up while watching TV, taking a shower, or driving in your car. Launch one of these and your odds for failure will go up dramatically. Stay away from true business opportunities which include these five components: (1) evidence of a genuine need, (2) experience in the field, (3) sufficient resources to launch, (4) customers ready to buy, and (5) a sound business model.
4. Don’t launch until you raise significant funding.
Write a lengthy business plan and shop it to friends, family members, angel investors, and anyone who will listen. If you are fortunate enough to raise a large sum of money, rent an office, buy some furniture, hire some employees, create your products, and then see if anyone will buy them. Don’t be resourceful like successful entrepreneurs. They cobble together enough resources to get a low-cost prototype into the market, and then confirm through actual sales that people want the product. They make a few, sell a few, learn a lot, and grow with cash flow
5. Don’t build a brain trust of mentors and advisers.
Keep your idea to yourself. Don’t tell anyone about it. Don’t solicit any feedback. Don’t seek mentors, advisers or team members. And be sure to keep all of the ownership yourself. This will allow you to fail quickly. Successful entrepreneurs do the opposite. They rely on a host of mentors, advisers, and team members to provide knowledge, experience, contacts, and resources. Their brain trust helps them survive and then thrive.
6. Don’t pivot when things don’t go the way you expected.
Be confident that your initial idea is right. Hold firm to your original business plan. Build exactly what you set out to build. Don’t change your product, pricing, packaging, channel of distribution, or business model. This is an important key to early failure. Don’t be like successful entrepreneurs who create a different company than they intended to build based on feedback from customers, new technology, changes in the marketplace, and new opportunities that arise.
7. Don’t create multiple streams of revenue for your business.
If your initial product gains traction, close the door to additional opportunities. Even if customers ask for products you could easily provide, don’t do it. Stay narrow and stay focused. Avoid the trap that successful entrepreneurs fall into of adding complimentary products that provide a complete solution to their customers. Having multiple revenue streams also makes them less vulnerable to a single product line which reduces the chance that they will fail. So avoid logical diversification at all cost.
These are the keys to failing fast and often. Follow them to get that highly coveted failure on your resume. However, if you want to actually succeed in business, do just the opposite. If you do, your chances for success will go up significantly. Good luck with whichever goal you choose to pursue!
Michael Glauser is an entrepreneur, business consultant, and university professor. He has built successful companies in the retail, wholesale and consulting industries. He is currently the Executive Director of the Jeffrey D. Clark Center for Entrepreneurship in the Jon M. Huntsman School of Business at Utah State University and is the author of the book Main Street Entrepreneur.