The failure rate of startups is relatively high, especially for first-time entrepreneurs. Roughly 50 percent of all small businesses fail within the first four years, and many of those are started by first-timers who have limited entrepreneurial, business, or management experience.
Even if you start with a fantastic idea, have a dedicated team to make that idea a reality, and plan for most contingencies, external factors beyond your control and a lack of overall experience can cause your business to collapse.
Failure is a real possibility for the vast majority of business owners. The question is — what are you going to do if and when you fail?
How to Follow Up After a Failure
If your first business fails, you’ll want to follow these steps, at a minimum, to begin your recovery:
1. Analyze the failure. After CB Insights combed through the post-mortem blog posts of more than 200 failed startups, they ultimately reduced the most common causes of startup failure to a relatively short list. Chances are, the root causes of your business’s failure are identifiable and common. Spend some time looking over your business’s history, even if it’s short, and see if you can recognize the main causes of failure, as well as the decisions that led to those causes. The better you understand this, the more likely you’ll be to prevent those outcomes in the future.
2. Get your finances in order. Next, make sure you get your personal finances in order. You’ll no longer be able to rely on your business as a primary source of income, and if you had a significant amount of your own personal savings tied up in the business, you may lose them in the business’s failure. Even if you end up having to declare bankruptcy, don’t worry — there can still be a bright financial future ahead of you — but you need to spend some time analyzing your expenses and figuring out a new line of revenue if you’re going to be successful.
3. Work with other entrepreneurs. Expose yourself to more entrepreneurs, whether that means attending more networking events, connecting with more entrepreneurs on social media, or just introducing yourself to business owners. Share your experiences and ask about theirs; you’ll get some new perspectives, and make new contacts along the way. Ideally, you’ll learn new ways to deal with the problems you faced as a business owner, and you’ll get some sympathetic support at the same time.
4. Take time for yourself. Entrepreneurship is demanding, with 25 percent of entrepreneurs logging 60 hours of work — or more — every week. Losing a business is tough, but it’s also a critical opportunity to collect yourself and spend some time doing what you want to do. Take a vacation (if you can afford it), work on the house, or spend time on hobbies and personal projects. You’ll de-stress, clear your mind enough to come up with some new ideas, and prepare yourself to take on whatever venture you have planned next.
5. Start thinking about a new business plan. Finally, spend some time thinking about a new business plan. If you’re cut out to be an entrepreneur, no single business failure can or should prevent you from following your dreams. Start keeping track of your fledgling business ideas, and sketch out the promising ones with prototype business plans.
Life After Business Failure
When moving on to bigger and better opportunities, make sure you also take advantage of the experience you’ve gained in the process:
- Contacts. Don’t alienate the people you worked with as an entrepreneur; these are contacts that will be valuable in your future endeavors, whether they become partners, employees or just contacts that can refer you more clients. The bigger your network is, the better.
- Mistakes. Reflect on all the mistakes you made during your tenure as an entrepreneur, including big and small ones. Every decision you made while leading your company is a potential lesson to learn.
- Authority. Don’t be shy; talk about your experience as an entrepreneur. Even if the business failed, people will respect you for your leadership and management experience.
Being at the helm of a failed business isn’t an indication of personal failure; instead, think of it as an important step in a much longer journey. Going forward with more experience, more humility and a new plan will make you more likely to find success in your next venture.
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This article, “The Next 5 Things You Should do After a Business Failure” was first published on Small Business Trends