A few months ago, we asked the question ‘What to do when a startup fails.’ One of our points in the blog was our human reluctance to admit failure. No one likes it. Most people find it difficult to say they were wrong, and someone else was right. In the context of startups, the biggest problem with this reluctance to admit failure is that it stops us from asking for help at a time when a company can be saved.
In this blog, we dive a little deeper into the reasons why people shy away from thinking about and planning for failure. We also explore concepts like failing safely and creating a safety net for your startup. Read on for a better understanding of why we shy away from admitting failure and find out how and whom to ask for help and build a safety net for your startup.
Why No One Wants to Fail
When was the last time you tried something new, failed at it and admitted to that failure? What may seem like a simple question is tricky to answer for many people, at least without thinking about their answer for a while.
To make answering easier, we’ll take the question apart a bit. Let’s say you just tried stand-up paddle boarding (SUP) for the first time this summer. That addresses the first part of the question and will serve as an example.
Moving on to the next part – did you fail at it? This is where things get a little more complicated. What does failure mean in the context of SUP? Does it mean you fell a couple of times and got back on the board? Or does it mean you were too scared to stand up? For the sake of this example, we’ll decide that being too scared counts as a failure. Falling and getting up seems pretty normal for someone new at SUP.
Next up, did you admit to your failure, or did you decide to keep it quiet, hoping your next time would go better? After all, if no one saw it, it never happened, right? Perhaps you felt ashamed to admit that stand-up paddleboarding scared you. This connection is critical.
Disconnecting Failure and Shame
As humans, we are programmed to associate failure with shame. According to Professor Taya Cohen of the Tepper School of Business at Carnegie Mellon University, shame lies at the root of failure and our fear of failure.
Failure directly influences how we see ourselves. Most of us also fear how others might see us following failure. If I admit to failure, will I be seen as a failure?
Failure for Founders
Within the startup context, this element of shame might become even stronger. Typically, tech startups begin with one person or a couple of people having a great idea that they would like to turn into a business. To achieve that, founders convince others that their idea is worth backing.
In the process, founders like you persuade family and friends, banks, investors, and others to back them financially and in other ways. The goal is to turn the idea into a success, and every backer is expecting you to do your utmost to make that happen. The expectations could hardly be higher, and that’s what’s making it so difficult for startup founders to admit when things aren’t going perfectly well. Here’s the thing, though: failure is necessary to make progress.
Why Failure is Necessary
Without failure, there can be no achievement. Remember the example of Thomas Edison we quoted in our previous post. Edison is said to have had 1,000 failures before he discovered the lightbulb. He set out with a great idea, and he did reach his goal but not without countless failures along the way. Edison chose to think of them as discoveries of ways that didn’t work.
What does that mean for today’s startup founders? Granted, it’s unlikely that you have 1,000 failed attempts. But failure is a part of the process that is moving you closer toward finding a way – or the best way – to realise your idea. Still, there is no denying that failure is painful and time-consuming.
Ideally, startup journeys would be straight lines from inception to sale. In reality, this rarely ever happens. Instead, most startup journeys are winding roads. Failures are not roadblocks. They are necessary detours that allow you to identify the right path. Put simply, without failure, there would be very little innovation or discovery.
Creating a (Company) Culture That Encourages Failure
Although failure is necessary, there is no denying the associated costs, both financially and in terms of time. To limit wasting either, startups and their backers need to encourage a company culture that encourages openness about failures to make way for improvements.
Creating a Just Culture
This is where startups in any area can learn from high-risk sectors. Think healthcare, nuclear facilities, or aviation – in all of these areas, decisions quickly become life and death considerations.
Creating a Just Culture means encouraging yourself and your people to look for the reasons why something went wrong rather than searching for a person to blame. It’s about understanding the context in which decisions were made. If you’ve never come across this concept, Wikipedia delivers a decent introduction.
In the context of startups that includes setting up sense checks to identify when you are running blinkered in one direction, for example. How can you do this? A simple approach would be to define milestones in your business plan. If the business misses them, it’s time to analyse why they were missed.
The reasons could be varied. You may be missing product-market fit, or your product or service may simply not have had enough exposure. Perhaps you’re trying to develop too many products at the same time as opposed to concentrating on the most promising one.
Crucially, having a Just Culture means stepping away from finger-pointing and scapegoat-finding. Instead, you’re encouraging early warnings and a search for effective solutions.
How to Ask For Help
Assuming, you notice that something is not working as well as it should be in your startup or the company is not growing at the rate you expected, who and how can you ask for help?
In our experience, many successful startups are (partly) built on the experience of industry veterans. Those professionals either mentor founders or accept a position on the company’s board of directors to offer advice as and when it is needed. In other cases, they are family friends that let you ask questions over dinner. That answers the question of who to ask for help.
How to ask may be more difficult. We have already mentioned that admitting failure or impending failure causes us to experience shame. Startup founders and their teams can eliminate or lower that hurdle by placing potential advisors in positions where they can observe the progress of the company as well as potential problems as they arise.
With that kind of insight, board members and mentors can flag issues before they develop into problems. Founders don’t need to ask when feedback is automated in this way. Doing this gives you a chance to implement changes before failure happens.
Aside from soliciting advice, founders can help themselves by focusing not only on their big ideas but also on the health of their business. More about that below.
Building a Safety Net For A Startup
I want to look at two aspects of building a safety net for your startup: Surrounding yourself with the right advisors and understanding whether your business is healthy.
Getting Good Advice
When you start turning your big idea into a profitable business, it can feel like you’re out there by yourself. However, in most cases, you can access expertise more easily than you think.
In the very early days, why not ask a friend, family member, or even an entrepreneur you follow on social media for their input? Their advice can be invaluable. Consider reaching out to a startup incubator for advice. Some of those organizations offer highly effective mentoring programmes.
Once your startup has grown, it’s worth establishing a Board of Directors or Advisors. These people may also be investors in your company. The point is they have a vested interest in your success and are ready to offer advice and support.
Reaching out to part-time or virtual senior advisers is another option. In the early days of a company, you may not need a full-time finance director, HR director, or head of marketing. But you may need their expertise from time to time. Establishing a relationship with a part-time or virtual senior professional in this field gives you another route to access advice.
Is Your Startup Healthy?
Don’t worry, we’re not going to look in your fridge!
Understanding whether your startup is on a healthy trajectory involves looking at its finances, sales, upcoming expenses, etc. If you can read your balance sheet, profit & loss, and cash flow statements, you can tell at a glance whether your business is doing well or needs support.
In fact, having access to this information through a simple dashboard provided by accounting and bookkeeping software like Xero lets you see within minutes whether the company is doing well or not. Having the right tools (literally) at your fingertips and using them to your advantage can prevent most of the tougher scenarios. Those tools were designed to be used by non-financial professionals as well as pros, so they’re generally easy to use and draw insights from.
Final Thoughts
Admitting failure is anything but easy. It simply goes against human nature, and doing anything that’s not in our nature is always a tough ask. However, by putting failure in the context of progress rather than shame and seeing it as a necessary step on the road to success, you’re making it easier to deal with setbacks or roadblocks.
Surrounding yourself with experienced advisers and making an effort to understand the company’s financial situation is another critical step toward startup success and growth. If your business could benefit from expert financial input, don’t hesitate to reach out. We’re here to help you succeed!