Recently a colleague and I presented a paper on multiple failures of one entrepreneur. Despite it being an "academic" paper it makes for interesting reading and conclusions. If you are interested, look at the full paper but read selectively. There were so many people in the audience that recognised some of the things that happened to this specifc entrepreneur who failed seven times. I have used it several times afterwards with great effect.
Here is the abstract:
Current theories of repeat entrepreneurship provide little explanation for the effect of failure as a “trigger event” in creation of successive ventures. Multiple failures offer potentially valuable insights into this relationship. New venture creation could potentially be the consequence or cause of failure. The relationship also depends on whether the entrepreneur learnt from the preceding failures. Our study indicates that preconditions of failure differed between the ventures, notwithstanding some similarities. None of the failures triggered the next opportunity, as every time the entrepreneur was already exploring new opportunities. Finally, the transformation mode of the experiences to entrepreneurial knowledge appeared mainly through exploration rather than exploitation as the moderator of the transformation process. Corrective actions depend on deliberate reflection.
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I write this from a personal perspective, as both an entrepreneur and an academic with a PhD in Entrepreneurship. This comment is based on personal experience and not research of any kind.
Failure comes in different levels for me. Small failures because I misread or misunderstood the market are not seen to be anything more than part of the learning curve, or school fees.
I have always in the past created numerous small businesses which I would sell after a year or two, in the days before capital gains tax. If these failed it did not worry me. They were often started without much research to be honest, more on the basis of opportunities identified. I have created (mainly) or purchased over 50 businesses since 1982. Of these approximately 20% were a waste of time, and could not get traction quickly and were shut down.
However, as I became more experienced I wanted to run bigger businesses and hit a plateau in size. I then did an MBA. At this point I was convinced I could give lessons in walking on water :). Soon after I finished the MBA I started to apply my skills and within a 2 year period had a company, part of a small group of companies, with US$6m turnover. I was now convinced about my water walking prowess :).
However, the group of companies collapsed. A number of key issues caused the collapse. Non-payment by a large client of a large sum of money, a poor team of directors and a poor financial controls.
This collapse required I sell all my assets other the family home in order to avoid liquidation and to settle the creditors. I suppose 98% by value were settled. I sold properties and businesses and was left with nothing.
And then the problems started. I will detail these in the next comment in case of space issues.
Part 2
I now went from being the water walker to the mud groveller. I had destroyed my financial and asset base, and along with it my self confidence.
Then the errors began. I survived financially for the next 6 months by selling assets, which was crazy. It took 6 months however for me to realise the stupidity of what I was doing. I then stopped this, and on doing some introspection realised that I was doing this as I was too scared to start a new business, and had been experiencing deep levels of depression, something I never experienced before.
I also realised that my failure was my fault. I realised that I selected and employed the useless directors. I decided on the strategy that lead to choosing the clients who did not pay. Conclusion - my fault. I then started to make progress as I was now able to move forward, having acknowledged to myself that it was all my fault. I had made errors. Simple as that. Business had not become too difficult. I had just made errors which had big consequences.
I then started looking for small opportunities. I had become a survivalist. I wanted to earn enough to pay the bills, while keeping the risk as low as possible.
I bought a broken business for a small price and started working in the business. However, I took the business on without any experience in the sector. What I learnt to my detriment is that this industry was full of bad people who never pay you. Over 3 years, sales of US$534k attracted bad debts of US$177k. Sales were fine for a business that was broken. I then canned it as the bad debt levels were unacceptable to me. The business was a labour based service business and I had reduced myself to this, as it was a safe haven for me.No smart staff, no smart business, just simple and easy. Problem was the risk was too high.
My confidence was partially restored during this time but nowhere near enough. During this period I started (2004) and completed (2009) with my PhD.
Part 3
It took a year after completing my PhD to get my confidence back, despite friends "abusing" me and asking how a PhD graduate could consider himself stupid.
But by 2010 I was my old self. Four and a half years of trauma and drama, and poor financial progress with my life.
But I was back to walking on water. I realised that i was smart, had lots of real business experience in the SME environment as well as the corporate environment. And then I started to look for opportunities.
However, I was no longer interested in small opportunities. I realised that I had lost a lot of money and time, was now in my 50s and had to recoup my losses and start again to rebuild my pension.
I also knew that small deals take as long, or longer, as big deals. So I had to go for the big deals. I needed to take a new approach. I then graded all my deals as short, medium or long term. Short term (0 to 3 months) pays the bills. Medium term (3 to 12 months) become the next short term deals. Long term 12 months+) deals are the wealth creators.
I have a clear vision of my harvest plan and how much I want. Now I am working at it.
More use of my brain and less hard work, not that I am not working hard. 2010 has been a long hard slog, but 2011 should be a very profitable year for me. I have a number of long term deals about to turn into cash, and I am seeing the return on my investment starting to mature.
Part 4
I now think I walk on water again. However, I am a lot more humble. I am creating many working partnerships with other people. I look for people with great ideas and I help them take it to market using the skills I have.
I am also a lot more cautious. This is because I have matured and realise that even if you do walk on water, you have to be careful. I fell I have acquired wisdom through this process. I work harder on preparing and ensuring that ideas are feasible and viable before I start. I walk away from bad people and bad ideas.
I now look for opportunities across the spectrum, not only at small, not only at large. I need them all. I manage my sales time carefully, and monitor my successes and failures. I has an idea which failed at the feasibility stage, and I was fine with that.
I like myself now. No more depression. I am confident in my experience, skills and abilities. I am humble in my confidence.
I want to take on the world. I am really trying hard to enrich and empower myself and my partners, but not at the expense of others. I am a better person for the experience, even if right now I am a poorer one financially speaking.
Brilliant write-up. So many interested point. Case study material
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