Business owners fail in order to succeed. If you have recently failed, or feel that you are feeling, read this article.  

In my own career, I can identify two types of business failures. The first type is failure that is part of testing, identifying, and rolling out successful products and services. In my publishing business, I am constantly testing new ideas. Out of every 10 ideas tested, 3 are outright failures, 6 are acceptable money makers, and 1 is a breakaway hit. In the baseball world, I hit 1 home run and 6 singles with every ten at bats. 

In this particular situation, failure is part of the business model. Failing – often repeatedly -- represents a necessary step on the way to finding success. The requirement is to identify failures quickly and move on, without incurring undue losses, so that a win eventually comes along and more than covers the expenses incurred to roll out losers. Direct marketers, internet entrepreneurs, agile software developers, venture capitalists, and oil drillers use this approach. So do salespeople, who know that they need 99 rejections to finally get a “yes” and make the sale. In his book Good to Great, Jim Collins called this approach “throwing spaghetti against the wall to see what sticks.” 

The second, more devastating type of failure happens when we invest a big portion of our time, money, and ego in a business idea that we are sure will work, and we lose everything. Worse, we lose everything for our investors, which could include friends and family. 

I experienced this type of failure when I started a Mixed Martial Arts (MMA) fighting league a couple of years ago. After investing over $200,000 of my own money, and some money from family members, I realized that the business would not be profitable. It took me a long time to pay back the personal debt I had incurred, and pay back my investors (Even though they provided equity instead of debt capital, I still insisted on repaying their investment).

Looking back, it is easy to feel like an idiot for starting this business. The risk/reward profile of the business was questionable, as I had to put lots of money in before seeing a penny, and there was no way to accurately project ticket sales until the week before an event. I had little control over many aspects of the business (e.g., fighter injury, state regulators, and the weather the night of an event). I miscalculated how much money would really be required to get this business off the ground. And I really didn’t know much about MMA, other than the fact that it was a rapidly growing sport. I probably never should have started this venture!

Most importantly, I could have bankrupted my family had I kept going. Fortunately, my wife and I agreed on an investment stop loss and, once we hit that number, we assessed the business and decided to cut our losses. Still, we lost $200,000 that we could have spent on our retirement or our children’s college education!

After a month of mourning my results and kicking myself, I saw things in a new light: Taking risks, even if they don’t work out, is a wonderful thing. Starting a business is a way for people everywhere to express their creativity and make their dreams come true. I had a dream, and I wanted to do something that pushed me beyond anything I had done before. Most people have dreams and never take action to realize them; I had at least taken action. I had met some fascinating people, put on some fantastic events for enthusiastic crowds, and learned a huge amount about an incredible sport and industry. My kids loved talking about the MMA business, and seeing the fighting cage set up before a show. Best of all, my wife and I had come closer together as well during this experience as we worked through the ups and downs.

I failed, but I would never make the same mistakes again. I learned a great deal about the kinds of businesses that generate profit at low risk, and the kinds that don’t. Now I only start businesses where I have less than $10,000 of my own money at risk, and that allow me to generate at least a 10:1 return on my investment. I will never again put my family finances at risk for a business venture!

In fact, since the MMA business shut down, I have made more money in my other businesses than ever before. I am more focused and more disciplined.

If you are facing failure, know that it is okay to fail. Don’t wallow in self-pity. Taking risks is what makes the USA and countries like it great. Business owners are ordinary people who do extraordinary things, and become extraordinary in the process. Sometimes the business works, and more often than not, it doesn’t (even if you went into your business more prepared than I did with the MMA business). But you are taking action when most people never do. You have an idea and you are going for it. The worst case is that you fail, get up again, dust yourself off, and learn from your mistakes when you try again. 

As Helen Keller wrote, “Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing.” 

Or, as famous acrobat Karl Wallenda said, “Being on a tightrope is living; everything else is waiting.” 

In my former business of Mixed Martial Arts, when a fighter finds himself in a hold that he can’t escape, he taps out. The fight ends and the fighter lives to fight another day. He congratulates his opponent, and loses no respect from his peers as long as he gave his best during the fight. At least he was courageous enough to get in the cage and face his opponent with the best that he had. Now he can go back to the gym, get stronger, improve his moves, and work to win the next match.