Be sure to conduct a post-mortem on your failed business. Then pick yourself up and try again.
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It’s unrealistic to think that your first business will be a smashing success. You may have heard the oft-cited statistic that 90 percent of small businesses fail. But this isn’t quite right: According to the Small Business Administration, for businesses that opened in March 2012 and were surveyed again in March 2017, about 50 percent failed within those first five years.
Related: Reinventing Yourself: Life After a Business Failure
This isn’t as bad as that 90 percent figure but it’s still hardly promising, especially for new entrepreneurs. If you’re a startup leader, your first business will, naturally, commit far more mistakes than your second or third. No matter how good your idea is, your lack of experience will make you more likely to fail than your more experienced counterparts.
Obviously, there are ways to avoid this fate. Some entrepreneurs are successful in their first attempts at building a business. For example, Elon Musk’s first company, Zip2, was a near-immediate success, and of course, Mark Zuckerberg had little business experience before starting Facebook.
But let’s assume for a moment that your first business fails. How should you handle this experience if you want to maximize your chances of eventual entrepreneurial success?
Related: 5 Ways to Recover from Startup Failure
First things first. You’ll need to recover financially if you want to preserve any career momentum. Depending on the nature of your business’s failure and your personal finances, you may be in a compromising position. You won’t have to look far to hear stories of entrepreneurs who have lost a ton of their personal money on a failed business. For example, Finic founder Vitaliy Rizhkov lost $1.5 million on his first business.
If you have an emergency fund, now’s probably the time to tap into it. If you’ve burned through your savings, you’ll need to work quickly to find another stream of income. It’s prudent to find a consistent, reliable stream of income, rather than jumping into a new entrepreneurial venture. In some cases, you may be pressured to seek an emergency loan, which is acceptable, so long as you have a plan to pay that loan back.
Depression, anxiety and burnout are common among entrepreneurs, even if their startups are successful. When you experience a crushing business failure after a period of excitement and hard work, you may feel especially devastated.
You owe it to yourself to spend some time emotionally healing. Different people will have different needs here. For some people, spending time with friends and family or in a support group will be valuable. For others, taking some time off to rediscover yourself may be the wiser course of action.
Take Steve Jobs’s crushing failure as an example; when he was ousted from Apple in the mid-1980s, he spent some time wandering around Europe, depressed, to find a new motivation to continue his efforts. Whatever you do, make sure you’re keeping your mental and emotional needs in mind.
It’s also important to spend some time reviewing the events that ultimately led to your business failure. The motivating factors behind your business’s demise will be obvious (such as a shortage of cash, or a major client that fell through), but it’s important to be comprehensive and study the precipitating factors that led to those outcomes. This will help you not only find peace about the failure of your business, but teach you key lessons you’ll need as you build your next entrepreneurial venture.
Because you may be inexperienced (or short-sighted due to your proximity to the problems), it’s a good idea to seek outside advice here. Spend some time studying the introspective post-mortems of other startups and entrepreneurs; CB Insights has a collection of 269 which are worth perusing. Alternatively, you could consult with a mentor or more experienced entrepreneur who can provide you with additional guidance.
Preparation for the next opportunity
After you’ve found some financial stability and feel confident that you’ve learned some important lessons about the nature of your business failure, you’ll be ready to start preparing for your next opportunity. After a few months away from your previous business, you should be in a healthy enough position to decide whether to return to entrepreneurship or divert to a traditional career path.
Whatever you decide, it pays to branch out. Start attending more networking events and talking to other people in your industry. In a traditional career path, this will lead you to more lucrative job opportunities, and in an entrepreneurial route, could lead you to the investors or partners you need, to make the business a success.
Related: 6 Proven Strategies to Rebound From Failure
Don’t think of your first business’s failure as a personal failure, and don’t buy into the idea that it’s going to prevent you from a successful future. For many entrepreneurs, an initial failure is just the first step of a long journey — one that can lead to a much higher rate of success.