You only learn if it hurts: How to fail fast — but cheaply
Laurence Woodburn, CEO of Woodburn Solutions, a Cape Town-based business development consultancy, knows a thing or two about failure. He learned what it looks like, how it feels and absorbed some tough lessons in the process — 40 million lessons, to be precise. Summing up his experience, he says: “Failure is never failure as long as you learn from it and you don’t make the same mistakes again. It’s a learning process. And you only learn something if it hurts.”
Entrepreneurs are born, not made
When Woodburn was young, naive and in his late twenties, he was working with a partner, developing a vehicle tracking system. He misjudged the market and found himself floundering with a system that wasn’t geared to respond to the technology of the time. He soon found himself dealing with complex legal negotiations and was haemorrhaging money. The markets turned, the business crashed and Woodburn and his partner were, in his words, marched off the premises.
His partner suggested a financial model to help extricate the business from impending doom. Woodburn took his advice, invested his retirement fund — and lost it all. All told, Woodburn calculated that he lost around R40 million in shareholdings in the process. Two decades on, he is a serial entrepreneur who defines himself as unemployable.
“You can’t make an entrepreneur,” says Woodburn. “You can work in a startup, but not everyone has the personality to make the sacrifices required to succeed.”
Don’t be first. Be the last
Running a business means to understand that a business plan is just that: a plan. It is not set in stone. But the plan does need to have milestones, with leeway on each side. It’s important to be flexible, but also to adapt and innovate along the way. “It’s easy to fail fast and cheaply if you put in place a set of parameters for yourself before you start. Those parameters should form a decent project plan,” says Woodburn.
He continues: “If you have an idea, the first thing you should do is to stress-test it to establish what already exists, and how you can improve on it. You don’t have to be first, but you must be last. Be the last person standing.”
See the warning signs
If the business isn’t tracking against the plan, that’s a clear warning sign. For example, if, at month seven on the plan, the business hasn’t yet reached the point of where it should have been at month three, then it’s important to re-evaluate and establish the causes. And, since an entrepreneur cannot rely on the comfort of a big corporate, with all the money and support that environment can generate, this is particularly important when it comes to securing funding.
Woodburn insists that money is available for startups, but stresses the importance of knowing at the outset how much you want, how much you need and how you will manage the funds. Investors, says Woodburn, would be reluctant to invest if the founders are not clear on those points.
He explains: “Money always flows towards the good deal. If it isn’t coming towards you, your deal isn’t good enough.”
It’s not all about the money
But failure isn’t only about not making money. Launching a startup is difficult, says Woodburn, citing the main reasons why businesses fail: lack of money, starting at the wrong time, inadequate products, complex or competing geography, external market forces and more.
The human factor is a critical element, he explains: “Even a well-funded startup can fail if the people around the table don’t get along. Everyone needs to be on the same page, subscribing to the same values, the same idea and the same ideology.”
That said, Woodburn doesn’t believe that startups can operate as democracies. The team structure needs to respond to the personality types around the table. As he explains: “You need someone to wield a big stick. If no-one is pulling their weight, you need a dictator at the helm. But if everyone is performing, then a dictator-style leadership won’t be necessary.”
Know what’s behind the mask
Working with partners is particularly risky, says Woodburn: “Everyone in business wears a mask, especially when money is involved. There are no external signs about what goes on behind closed doors, and the sad thing is that everyone is in it for themselves. If you have to consult with lawyers extensively, you’re going to fail.”
The first step is for everyone in the business to leave their egos at the door. The second is to find trusted advisors in the form of mentors or experienced individuals who have trodden the same path.
Find a greybeard
Woodburn speaks from bitter experience on this point: “I had the ego kicked out of me, and we didn’t have anyone with grey hair to monitor us and give us advice,” he says. “You can have someone who isn’t an intelligent person, but if they’ve lived to eighty, they’ve seen it, been through it, know stuff. You can’t discount their knowledge.”
And if the business does fail, then what? Whatever happens next, according to Woodburn, depends on the state the entrepreneur is in after the event. In his case, he was burned out after nine months of fighting to succeed in his first business. “I was in no condition to find a job at that point. First you have to understand that your well-being as an individual and your future sustainability should come ahead of anything else. As an entrepreneur you have to look after yourself.”
How to be a good entrepreneur
Woodburn summarises his general rules for how to be a ‘good’ entrepreneur: “I don’t agree with the notion that if you work hard enough, things will happen. If you want to be a good entrepreneur; you need perseverance; an understanding of your parameters; and you must be prepared to accept and acknowledge failure. Get some mentorship and advice, and always look after yourself.”
There is one more important point: “Never discount the value of luck,” says Woodburn. A chance meeting with someone at just the right time; or finding a shared connection in a network could change the structure or direction of your business.
Ultimately, however, Woodburn’s parting shot is perhaps the most important. If a business fails, that doesn’t put a stop to the entrepreneurial journey, but rather it puts a brake on it.
“You’re not a failure because the business you were trying to grow failed. It does not define you,” he says. “That’s not what life is about.”