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Failure: One of the worst nightmares for an entrepreneur

Jul 13 2012, 12:58   |   By SME Mentor

Dhvani Desai

What's the first thing that comes to your mind when you hear of a company that has suffered huge losses and is on the brink? "We knew he was good for nothing... he should have perhaps not started it in the first place... He doesn't know how to run business."  These are perhaps the most common reactions that you might get to hear instantly. Failure is the worst taboo that Indians face in our country.  

As a society we are very comparison driven. "I don't know how many people go to a party and say 'you know what, I have been failing for the last 5 years'." asks Alok Kejriwal, serial entrepreneur and founder of Games2win. "We have grown up in an environment where all our gurus, right from parents to teachers loathe failure. They despise it. Where as in most parts of the world especially in the US its a stepping stone to success."

Infact for some, the title of an entrepreneur itself begins with disgrace. "If I were to go out and say that I am an entrepreneur people think Im jobless. Our community is not open to experimenting with new ideas, or even taking up entrepreneurial activities till someone proves himself to be successful," complains Vikram Vora, founder of My Dentist, a chain of dental services across to serve the common main. "People need to be informed that there are failures and people need to be okay with that."

According to Mukti Shah, Clinical Psychologist and Entrepreneurship Consultant, failure among entrepreneurs is challenging on two fronts, "Not only do they have to bear the real loss in terms of huge debts, or legal affairs, but also have to deal with a negative emotional response," she says, "This may result in self-denial, depression. and even cause irrational behaviors such as suicide."


Is it normal for an entrepreneur to fail?

Right from artists like J.K. Rowling the author who created Harry Potter, to Bill gates the founder of Microsoft, we have heard of personalities who have been given the stamp of failure by their immediate circle long before their success was unfolded to the world. In India companies like Subhiksha have closed down; many have been bought out and some like Kingfisher Airlines who are still battling for survival.  

"Within the life span of each entrepreneur, there will be failures at some point. But that doesn't mean that he will not see successes," Says Mukti.

"In fact, 70 to 80% of all startups do not last beyond two years," says Mukti, "And barely half of those who survive the first year remain in business for the next 5 years."


Ray of hope

While failure is taken very negatively in most parts of the country today, there are few pockets which have started recognizing it as an opportunity, according to Anjana Vivek, founder of VentureBean Consulting.  "Cities like Bangalore have began seeing it in a different light. I have recently observed that such failures may not be necessarily associated with incompetence," she says, adding, "what happens in these places is that entrepreneurs either move on to other ventures, get bought out or take up salaried jobs."

Are you trying desperately to turn around your failure?

Regardless of how low a business has fallen, or of how much time it is taking to rebound, one of the most difficult thing for an entrepreneur is to accept that his business might be nearing its end. Or perhaps is just on the brink of that F-word called "failure". But sometimes a lot more damage is done in this process of denial. "Most people try to hide that failure and they invest and invest hoping that the failure turns around," says Alok kejriwal. 

On the other hand if one begins to sense the warning signals, much heartburn can be averted. So how does one know if his business is on the edge and that something needs to be done. 


Symptoms:

1.      Continued underperformance is the most obvious symptom, yet many entrepreneurs turn a blind eye to this atleast initially.

2.      Turnover/attrition of key people across functions

3.      Financial: Mounting debts and liabilities, delayed payments, reduced budgets

4.      Inability to anticipate possible problems and not having a contingency plan for those scenarios, usually characterized by making the same mistake over and over again.

5.      Mentors: Reduced interactions with advisors/mentors/consultants to the company

6.      In startups, the entrepreneur's inability to delegate is a big warning sign.

7.      Inability to adapt to change in time. 

Explaining your business

According to Kejriwal the simplest way of telling that an entrepreneur is on the path to failure, is if people cannot understand what the company is doing in one or two sentences or one or two minutes or in one or two conversations. "When you cannot explain to anyone and everyone including your granny or your grandfather or your watchman what you do in less than 30 seconds, I think you are bound to fail," he says.

 Defensive Behaviour

"Even if a company gets very defensive when you tell them something negative about them, they are bound to fail. Because essentially you are blocking feedback," says kejriwal.

Periodic losses may not lead to failure

However, Anjana Vivek, founder of VentureBean Consultants warns one should not confuse periodic losses with failure. "While the company is being restructured and there is a change in business models, it may lead to a temporary fall in cash flow and reduced customers." Once a new business model takes off, the business may get back on track and grow. Therefore one should not assume that negative signals in the short term indicate a long term failure of the venture.

dhvani.desai@network18online.com


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