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Entrepreneurs Fall Down, But They Get Up Again

By Andrzej Zwaniecki

In 2000, Marc Fleury realized that something was wrong with Telkel Inc., his computer-application startup. The number of users was growing, but revenues were not.

Fleury and his partner had a difficult time figuring out what they could sell, for a profit, to the users drawn by their free computer programs. When venture capital funding became scarce and the money they had to invest ran out, they had no choice but to fold the company.

The Telkel case - described by Fleury for the Kauffman Foundation, which works to advance entrepreneurship - is not unusual. According to U.S. Census Bureau studies from the 1990s, about half of startups fail in the first four years, despite considerable amounts of time and energy and often life savings invested in those ventures.

Having a great idea is not enough to succeed in business, entrepreneurship experts say. Startups fail because of an insufficient or ill-defined market, lack of planning, inadequate funding, poor cash management and other reasons.

Getting everything right from the beginning is difficult because business enterprises are driven by passion and entrepreneurs usually have limited resources, according to Barry Moltz, an entrepreneur and entrepreneurship expert. So many things have to align for a startup to take off and fly that the outcome, to some degree, is unpredictable, he told America.gov.

"With all the odds against you, you need to be a little crazy to start a business," Moltz said jokingly.

When inexperienced entrepreneurs have an idea, they want it so much to take on life that often they do not notice that it may not make economic sense or that it may require money or managerial skills they do not have.

Sometimes, when things start going wrong, they can save their firms if they see the problems and correct mistakes. But many entrepreneurs fail the test of the market and face a choice - clean up the mess and find a regular job or ... give it another try.

Real or "born" entrepreneurs have a hard time letting go of an opportunity to create something from nothing, even if they initially fail, Moltz said. So they bounce back to try again, at which point they sometimes succeed.

Repeated attempts at business ventures come more easily to U.S. entrepreneurs than to their counterparts in Asia, or, to a lesser degree, in Europe because they are part of the American culture, which forgives failures easily and cheers those who come back, according to Jeff Dennis, an entrepreneur and entrepreneurship expert.

"In America, you just dust yourself off and get [back] on the horse," he told America.gov.

Dennis, who runs workshops for small business owners, said many entrepreneurs use euphemisms when they refer to their business failures because they view them as learning opportunities. In his book Lessons from the Edge: Survival Skills for Starting and Growing a Company, co-authored with Jana Matthews, entrepreneurs describe their business mistakes and the lessons they learned from them.

Dennis said that entrepreneurs can grow as business people through continued education and peer-to-peer learning.

Experts say an honest assessment of what went wrong and appropriate conclusions for the future drawn from the experience are important.

Fleury, who concluded that the major problem of his first venture was cash-flow management, decided his second business had to turn a profit from the beginning. When Telkel users kept bugging him about onsite training, he realized that the next opportunity might be in training, support and consulting services. In 2001, he formed JBoss Group, with those areas as the core business of the new company.

According to Moltz, entrepreneurs need resiliency and confidence to survive and thrive. In his book Bounce! Failure, Resiliency, and Confidence to Achieve Your Next Great Success he advises entrepreneurs whose ventures failed to let go of the shame of losing and move on. Sometimes there is nothing to learn from a failure, he said. In such a case, a businessperson should view what happened as an opportunity to take a different path.

"You cannot allow yourself to wallow in a failure and get stuck," he said.

Moltz advertises the fact that his own first business failed and that his partners kicked him out of his second one. He succeeded with the third startup, which he sold when the Internet boom peaked in the 1990s.

Moltz said successful entrepreneurs realize that a failure is as much a normal outcome of the entrepreneurial life cycle as a success and that the entrepreneurial drive in the long term matters more than particular outcomes.

More information about entrepreneurship ( http://www.kauffman.org/ ) is available on the Web site of the Kauffman Foundation and about business failures ( http://www.sba.gov/advo/stats/bh_sbe03.pdf ) on the Web site of the Small Business Administration.

Source: U.S. Department of State