10 Things All Entrepreneurs Fail At
Editor’s note: James Altucher is an investor, programmer, author, and entrepreneur. He is Managing Director of Formula Capital and has written 6 books on investing. His latest book is I Was Blind But Now I See. You can follow him @jaltucher.
I was on the phone with Tony Conrad at True Ventures pitching a business idea I had in early 2009. The site was built and we even had people registered for it and I had about a half million dollars already committed but I wanted a VC firm on my side as well. I don’t know why. Maybe I thought it would give me some credibility and I desperately craved it after the divorce I had been going through.
Tony asked a question I thought was very smart. And now I forget exactly what it was. But I’m going to paraphrase what I think he said. He asked, “What have you failed at already in this business and how have you learned from it?”
I think I lied in the answer. Why not? But I can’t remember what I said.
And when I got off the phone I knew he would not put in money. I had just not failed enough yet at this business and I had not learned enough.
Later on I decided to not accept the money I had raised and not do the business at all, at great personal cost to me.
It wasn’t a good idea and I didn’t want to spend two years of my life losing everyone’s money, including more of my own. So I stopped it.
But Tony’s question brought back memories of several successful businesses I had either started or been involved in and how much I had utterly failed even during those businesses. Failure sucks in every way.
Business gurus will write books like “Failing Forward” blah blah blah, but I can tell you this: at that moment when you fail, there’s nothing to learn. It just sucks. For me, I take it very personally when I fail in each of the below ways I’m about to list. I’m too much of a perfectionist and I associate shame with every kind of failure. But ok, I admit it. “My name is James A…” and you know the rest. Former world chess champion Mikhail Botvinnik used to tell his students to study their losses the most because you learn the most from your failures. He would even practice playing while someone blew smoke in his face so he could conquer all his own personal obstacles.
I’m not that smart. I don’t like to fail at all. And I don’t like it when people blow smoke in my face. But acknowledging, cataloging, and then recognizing when you do fail is the first step to maybe learning from them. So I’ll take care of that part for you. Then you can fail, not want to kill yourself, and go on living and hopefully succeeding.
Incidentally, Google thinks I’m an expert on this. Apparently, the top phrase on Google that took people to my site last year (other than my name) was “I Want to Die”, which takes people to this post.
10 Things Entrepreneurs Will Fail At
1. You will lose some customers. Not everyone will be happy with your product forever. Or, not everyone will be happy when you stop paying them bribes. Or arranging their sexual escapades. Whatever. In my first business I started to lose HBO as a client. HBO! I had worked there. Heck, I had hired my own business and then left! And then the people who I had hired to take my place had their own agendas. I was backstabbed. It happens. Deal with it. You can’t keep every customer forever. Which is why you have to every day list potential customers, call new ones, come up with new ideas and products. Every day. If you didn’t today and your spouse is waiting for you to come to bed then she or he is going to have to wait a little longer before they can cuddle with you. That list needs to be finished.
2. You will lose some friends and family. You’re spending so much time on your business that inevitably you will not be able to match all of the expectations of the people who love you. At that point you have to make choices but don’t forget that running a business you have responsibility to not only friends but employees, customers. your future family, and investors who put their hard-earned money with you. I started one business with a close family relative who no longer speaks to me. That happens. You spend so much intense time together it’s like a lifetime of every psychological insult that has ever happened to you comes out and you vomit it all over each other. You’re comfortable with each other because, after all, you’re family. Until you become comfortable enough that it all ends.
3. You will lose the faith of investors. Not all of the time, and hopefully not at the end, but there will come a time when the investors question you. This is normal. Answer their questions. Be honest about mistakes, about what you learned from them, about what you expect in the future, and then move towards that future. Vaultus was the first business for which I ever raised money. My business before that had been profitable from day one and we turned away all money. So, of course, I wasn’t qualified to run an unprofitable business that had raised a lot of money. First they asked me to step down as CEO, then they asked me to step down from the board, then they removed me from the company website. Was I upset? Of course!
When they first asked me to step down from the board, I put up a meager fight. They said I had missed two board meetings in a row. I blamed “9/11”. The guy, Savio, actually laughed at me. So I was off the board. The next time he called me was when he needed a recommendation from Calpers for his fund and Calpers was planning on calling me. I said to him, of course I will give you a good recommendation. And I did. Never hold grudges.
4. Your idea. Your idea might be a bad idea. I was taught in school that the best thing an entrepreneur can do is “focus”. This is not totally accurate. Yes, focus on your business but you may have to totally change ideas, tweak ideas, mate ideas, transform ideas at different points.
5. You will fail some of your employees. Employees are there for many reasons. Money. Potential career advancement. Exploitation (not a bad thing, they want to learn all they can from you so they can then start their own business). Sex (lots of it happens AT the workplace. And I do mean physically AT the workplace. Note I capitalized it twice). Sometimes they won’t always get what they want. Sometimes you won’t always get what you want from an employee. It’s ok to let these employees go as quickly as possible so they find what they are looking for elsewhere.
6. You will fail at keeping stress levels low. Sometimes the stress is too much. I’ve heard about three heart attacks in the past two months.
7. Sales. You can’t win them all. Sometimes your competitors will underprice you. Sometimes they will trash you behind your back. Sometimes they will have a nephew who is making the decision and there’s no way for you to know that. And sometimes they are just plain better than you. You have no idea.One time I was pitching Tupac’s manager on doing the post-memoriam website for Tupac. I had a CD-ROM (yes, a CD-ROM) demonstrating my work. Only problem is: I had never used a Windows machine before. Only Macs and Unix machines. So I didn’t know how to open the CD Drive. He just sat there without helping me and said, “You don’t know how to use a computer and you want to do Tupac’s website?” I mentioned to him that I had been thrown out of graduate school for computer science. He then laughed me out of his office. I was humiliated.
After losing a potential sale there’s a few things you should do:
- Call the decision maker and say, “Just for my own learning, is there anything we could’ve done better?” Then take sincere notes.
- Then ask, “Is there anything else we can do for you. Any other way I, personally, can help you succeed at your job.”
- And conclude with, “Well, it was a real pleasure going through the process and learning about your business. Please call us if you need anything new.” And check in every month after that. Send monthly updates of customers you are winning, new products you are building, etc.
But, if you are being laughed at all the way to the elevator the best you can do is just swallow your pride and tell yourself to learn that when you are ready, learn how to open the CD-ROM drive on a Windows machine. And, perhaps, blame someone else. But that was hard for me to do in this case.
8. Communication. Some people are just simply going to disagree with you. Some people you work with might disapprove of that button in the center of the box you insisted go there before the box was delivered. Some investors might not like you personally. Your landlord might not like you and might want to kick you out. You’re just not going to be able to charm everyone like you are used to.
9. Raising Money. I just saw this happen: great idea, great people, revenues, and profitable and…the company in question could not raise money from professional venture capitalists. Were the VCs stupid? Of course they were! Everyone is “stupid” who doesn’t hand over their hard-earned money for you to play with. But, it’s their choice. And it’s hard to raise money. So you have to always make sure you have a “Plan B”. I’ve seen Plan B work remarkably well in several instances in the past few years, particularly companies I invested in pre-2008 that then had to make it through 2008-9 without any venture capital help. How did they do it? In general, Plan B involves getting to break even as quickly as possible. Getting rid of product categories that don’t make money, and usually switching to a service model where you charge for a specific service, and only use employees to create that service who will make you profitable. The spread between what your employees cost and what you charge is how you pay your lofty salary and office space.
And again, just like in the above for “Sales” you keep in touch with everyone, you send updates. You make sure that everyone is aware of achievements. You throw a big Christmas party and you invite me (don’t worry, I won’t come, though but I’m a bit insulted you didn’t invite me and you know who you are) and as you grow go out there and raise money again. Someone once told me, “When your business is ready for it, the money raising will be easy.”
10. Yourself. You will certainly fail yourself during the process. You can’t do everything. You can’t get everyone to like you. You can’t get everyone to buy your service. You can’t stay in top shape. You can’t. You can’t. You can’t. Well, sometimes you can. But most of the time, you can’t. Because you can’t control the world around you. Give up control. Learn to be flexible. Every day come up with new ideas for your customers, new ideas for your product. If you aren’t doing it, then who is? Who will have the passion you have?
And in the meantime, while juggling all of that, you have to keep your health up. Or else you will fail more.
10. Your business. And sometimes, your business will fail. It simply won’t work. The cash you have in the bank will go to zero. Your employees will quit, you can’t raise any more money. Your customers will leave because they don’t want to go down with a sinking ship. You’ve failed. As I’ve mentioned before, sometimes things just keep getting worse, and you can’t do anything about it.
[Editor's note: I see James put the #10 twice and titled it "10 Things..." so I guess entrepreneurs also fail at top 10 lists.]
What will you do then?
Well, it’s so much fun to repeatedly fail at everything, you’ll just have start all over.
10 Things All Entrepreneurs Fail At | James Altucher