Why business failures are a good thing

Don't be afraid to fail. The most successful people in life are those who have made big mistakes and learned from them

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David FullerMy very first business venture, besides selling lemonade, was selling worms with my brothers – and it was disastrous.

Our family lived on a small acreage outside of the city limits. My brothers Rob and Paul were close in age and always looking for new exciting things. I was 13.

This particular summer, we needed money to go to the county fair. It just so happened that we came across an ad in the Buy and Sell titled Worms Wanted. The ad read, “We buy worms, $15 per thousand.” In 1976, $15 was a lot of money!

It didn’t take us long to respond to the ad. We knew where the worms were – in our yard. We made the call and went right out to our barnyard and dug up worms. Five thousand worms, to be exact.

We sweated in the sun and counted every one of those worms, dropping them each into a bucket with a lid so they wouldn’t escape. Since it was quite hot that day, we thought the worms would like some water to drink.

Big mistake.

The next day, the nice man drove out from town and handed us $75 – pure profit for those 5,000 worms (if, like most business people, we didn’t count our time digging them up).

We barely had time to show our father the money at dinnertime that night when the phone rang. Apparently worms with water and heat die rather quickly. The worm buyer was understandably angry. But he didn’t want the money back, he wanted worms.

Doing what was right, the next day we went digging for another 5,000 worms. This time, it was much harder – all the places we had harvested the worms the day before were pretty much empty. We had to resort to digging around in our mother’s garden, knowing very well that we were risking our lives doing so. We found another 5,000 worms but it took a long time.

We wrapped up the worm business shortly after we walked back into the house. We learned the hard lesson that your product has to be good every time you sell it. We also realized that we really didn’t want to be in the worm business.

Every business has times in its lifecycle where it isn’t profitable. In fact, 50 per cent of businesses are never profitable and end up shutting their doors within three years of starting. For some businesses, this period of unprofitability is just a short time during startup. For others, this might happen during an expansion, a downturn in the economy or after there’s been a technological shift (VCR to DVD, for example).

Even low overhead businesses, such as a sole proprietorship selling a simple product or service, have a period where they have expenses without generating revenue.

There are many reasons why businesses aren’t profitable. Like many entrepreneurs, I’ve owned a couple of businesses that weren’t really profitable for periods.

So why do some people think that business failure is such a great thing?

  • We can learn so much. After one of my businesses downsized, my partners asked for a written statement of what went wrong. There were a number of reasons for the lack of success, but the act of going through the process of analyzing the failure was quite revealing.  It allowed me to realize that it was the business model that failed, not me. It also gave me the opportunity to learn from the mistakes I made and take ownership of them.
  • They make you stronger. Not only did the failures I’ve had prove to be learning experiences, they gave me a thick skin. They’ve allowed me to go through incredible pain and then realize that this too shall pass.
  • Failure breeds success! Whether it’s the realization that we don’t want to experience failure again or the understanding we’ve gained, studies show that the most successful people in life are those who have made big mistakes and learned from them.

When economies are flush with cash and the living is easy, it’s easy to forget the key elements of success, which are determined by the value we create for our customers. Business failure prevents the overconfidence found in the overnight successes or the quick and easy money.

The school of hard knocks is still one of the best teachers of character. We can’t forget that as we strive to teach a new breed of entrepreneurs who are eager to outperform us.

Troy Media columnist David Fuller, MBA, is a certified professional business coach and author who helps business leaders ensure that their companies are successful. David is author of the book Profit Yourself Healthy. He can be reached at dave@unstuckstrategies.com.

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