Suzzanne Uhland has addressed the intricacies of the daunting, sometimes devastating, process of filing for bankruptcy. And although there have been plenty of cases from which managers, CEOs, and entrepreneurs can learn in order to avoid falling victim of unawareness, it is important to address the topic of bankruptcy from different points of view. The most famous bankruptcy episodes always include a well-established business. As a matter of fact, Suzzanne Uhland has already talked about them for they can be used as the perfect example to learn one thing or two. Nonetheless, when it comes to startups and ventures, few things have been said about how to face and subsequently deal with bankruptcy.
Entrepreneurs always decide to embark themselves on their ventures after having listened to hundreds of times that single compelling advices that motivate them to start their own business, thusly leaving behind freelancing activities, cranky customers, fixed schedule jobs and days of everlasting uncertainty about whether it is possible to launch a $4,000 dollar venture. Somehow, the most common connotation about entrepreneurialism depicts some sort of a dream life full of resources to all the stuff entrepreneurs have always dreamed of: trips, vacations, prestige and the latest mobile phone. Well, first and foremost, in order to achieve that, entrepreneurs have got to start their business, and although they will probably end up calling it quits or, worse, selling their hard-won assets. But that is definitely a good thing, and here is why:
Entrepreneurs fail all the time
Yes. That is as simple as it gets. The entrepreneurial journey is a never-ending, always-compelling trend: entrepreneur, irrespective of their success, whether they are poor, millionaires or even billionaires, always keep on losing. Maybe the false expectations behind the hype make entrepreneurialism somewhat misguiding, for reality dictates otherwise. People looking forward to starting that business idea and becoming entrepreneurs had better get ready to feel tons of pressure and see failure behind every corner about 95% of the time. But, that is indeed a good thing: Steve Jobs, Bill Gates, Richard Branson and even Walt Disney failed all the time. In fact, according to recent figures, the average millionaire goes bankrupt at least 4 times, and 3 out of 4 new ventures fail. Such statistic suggests that, in general, by the 5th year, irrespective of the industry, over half of all new businesses and startups would have shut down their activities.
But why do they fail?
There are several reasons behind why new ventures and entrepreneurs fail, the number one reason why all businesses fail is emotional pricing: entrepreneurs always overprice their products or services and disregard following market adjustments —they are just too stubborn—, and, as a consequence, they realize they are not getting the expected results, fail and, finally, they give up. As a matter of fact, the influence of the current economic climate has little to do with the industry or the management in this sense. And, of course, there are other reasons why ventures fail: having different expectations, not paying taxes, lack of knowledge, lack of proper planning, lack of financial knowledge, etc.
How is this good news?
The aforementioned figures, rates, and statistics, alongside the reasons why businesses fail, are actually encouraging and compelling enough for every entrepreneur and venture enthusiast. What such landscape really suggests is that: competition is not really that strong and, eventually, entrepreneurs are likely to succeed if they really keep on trying.
Although such reasons depict something different —as if, today, failure were the most common element in the corporate world—, in reality, that is rather normal. In fact, the people who manage to succeed despite the circumstances are the ones who advocate for common sense and continue trying even when facing unavoidable failure. And that is perhaps the greatest secret and lesson —which is not shared during interviews—. Just keep trying and do not overlook the power of common sense: all it takes is just a single win. After that, things get much better. This is not an overnight success.
However, businesses will fail
It is not difficult to predict with an impressive rate of accuracy that an entrepreneur’s first business endeavor will be a total mess. A disaster. And it is better to say it this way. Experience comes from practice, which is why that plethora of business theory and degrees will not matter in the end. Common sense is something that is earned through experience. In the beginning, almost every single entrepreneur overlooks the possibility of acting wisely and reasonably: they will overprice their products and services; they will treat both customers and employees wrongfully; however, do not think that just because failure has arrived it is meant to stay: the sooner entrepreneurs embrace failure, the sooner they will be successful. Such premise is what real investors understand the «hard facts» of the business world. Be that as it may, remember: if an entrepreneur has an idea, he or she ought to start chasing it that same week: stop preparing, stop waiting to be ready. Good enough is just good enough.
* Featured Image courtesy of Alan Levine at Flickr.com