The ‘F’ Word

The entrepreneur is always faced with the possibility of ‘failure’. We touched upon failure in one of my previous posts, “What does Success mean to you?“.

Regardless of their belief in their business and the value that it offers to the customers, the market will ultimately test them. However many success factors they think are present, sometimes the lack of just one factor may cause failure.

Uncertainty and risk are the oldest companions of the entrepreneur. Also, adding to the problems are the statistics of business failure that are widely reported and quite scary.

Yet failure is not a simple concept. It implies the absence of success and, like success, it can only be understood in relation to people’s goals and expectations. Failure happens when expectations are not met. It is a question of degree and (like success) means different things to different stakeholders.
The entrepreneur’s angle sees at least eight degrees of failure that can be identified based on the performance of the business and the way the entrepreneur retains control of it.

These are as follows:

1.    The business continues to exist as a legal entity under the control of the entrepreneur -
i.    The business performs well but does not meet the social and self-development needs of the entrepreneur.
ii.    The business fails to achieve set strategic objectives.
iii.    The business fails to perform as well as was planned but is financially secure.
iv.    The business fails to perform as well as was planned, and needs additional financial support.

2.    The business continues to exist as an independent entity but the entrepreneur looses control -
i.    The business is taken over as a going concern by new management.
ii.    The business is taken over with restructuring.

3.    The business does not continue to exist as an independent entity -
i.    The business is taken over as a going concern and absorbed into another company.
ii.    The business is broken up and its assets disposed of.

Managing Failure
Failure is a fact of business life. It is the possibility of failing that makes success meaningful. Failure is not always a disaster and it does not inevitable mean the end of the venture. It is a part of the learning process. Minor failures can be positive indicators of how things can be done better. Such failures must not be ignored. They must be dealt with before they lead to larger failures. Success and failure exist relative to expectations. Failure occurs when expectations are not met. Managing success and failure have a lot to do with managing people’s expectations for the venture - keep them positive, but at the same time realistic.

“There is no failure except in no longer trying” - Elbert Hubbard

Also Read:

* Warren Buffett’s Secrets to Success
* What does ‘Success’ mean to you?
* New Venture: The Factors of Success

Tagged as: Business Failure, entrepreneurship, Failing, Managing Business Failure