How to Deal With Failing In Your First Startup Business

So you’ve decided to finally apply the advice you keep hearing and reading about. You’re determined to build your own business. No more freelancing for you from now on! Good-bye hard-work, cranky clients, and days of constant uncertainty about whether or not you’ll win that $3000 dollar project!

Welcome to that “12:00 o’clock going-to-the-office-never-have-to-answer-to-nobody” dream life! You’ll finally have the time and resources to do all the stuff you wish you’d done. Trips, vacations, freedom, and prestige!

Well, you’ll first need to start your business. And guess what? You’ll be very likely to end up closing it or selling its assets! And that’s a good thing. Let me explain.

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Entrepreneurs Fail Constantly

That’s right. You could say it’s a never-ending, always-fashionable trend. Entrepreneurs, whether they’re dirt poor, millionaires, or even billionaires, just keep on losing. Don’t believe the hype. That’s the real state of entrepreneurship.

If you want to go into business for yourself, get ready for feeling failure and pressure about 90% of the time. But don’t worry. You’ll at least be in good company.


Did you know about Steve Jobs’s or Bill Gates’s failures? or that some of the most successful entrepreneurs initially faced much failure? Did you know the average millionaire goes bankrupt at least 3.5 times or that 3 out of 4 start-ups funded by Venture Capital fail?

So, if you were to generalize, by the 5th year, regardless of the industry, over half of all startups shut their doors.

That’s just facts.

But Why?

And the reasons why this is happening are even more ludicrous. According to StatisticBrain, the #1 reason all businesses fail is emotional pricing.

That’s to say, entrepreneurs usually overprice their products or services and are too stubborn to adjust to the market. They fail and give up. It’s not the economic climate, the industry, or management.

The list of bankruptcy reasons goes on, with increasing audacity and disregard for common sense:

  • Living too high for the business
  • Nonpayment of taxes
  • No knowledge of pricing
  • Lack of planning
  • No knowledge of financing
  • No experience in record-keeping

Why These Numbers Are Good News!

These high failure rates and stupendous reasons for failure are actually really encouraging for any budding entrepreneur. What they mean is:

  • Competition is really low.
  • You’re bound to succeed if you keep at it.

These reasons paint the picture of failure as being the most common element in business today. That’s normal. Because of this, the only winners in business are the ones who:

  • Apply common sense (no emotional pricing, paying your taxes, planning and adapting, etc.)
  • Continue practicing business after failure.

That’s the big secret you don’t hear in the interviews: being an entrepreneur isn’t so hard. Just keep at it and apply common sense. You only need one win, and bam: you’re a hero. Even billionaire entrepreneur Mark Cuban admitted this in his book:

“It doesn’t matter how many times you fail. You only have to be right once, and then everyone can tell you that you are an overnight success.”

Your Business Will Fail

I can predict with great certainty that your first business will be a disaster. I’m happy to be the first to let you in on this secret. Wisdom comes from practice, so it really doesn’t matter how much you’ve read or been taught, how many PhDs you have, or how much encouragement you get from family and friends.

You won’t have that common sense. You’ll reach too far. You’ll overexpand, overprice, and treat clients and employees wrong. I know I’ve said it’s easy, but most of us aren’t born with that much needed common sense.


You’ll fail miserably. Almost nobody makes a million dollars with their first business. Almost nobody makes that first jump. Not even superheroes. Neo from The Matrix Series can fly and dodge bullets, but even he didn’t make that first jump in the movie.

Here’s Neo looking smug and confident.

Here’s Neo doing/failing his first jump

The sooner you are OK with failing, the sooner you’ll be successful.

And don’t think for a second that just because you’ve failed, you won’t be able to get investors or hire people again. That’s because real investors and smart people aren’t surprised by failure. They already know these hard facts of the business world.

Charles Holloway, director of Stanford University’s Center for Entrepreneurial Studies summed it up beautifully:

“How well a failed entrepreneur has managed his company, and how well he worked with his previous investors, makes a difference in his ability to persuade U.S. venture capitalists to back his future start-ups.”

What All This Means For You

So the conclusion is you should start your first business as soon as possible so that you’ll be able to fail as soon as possible. The sooner you fail, the better. You want to have a startup mentality.

One awesome idea to apply comes from Start-Up Nation, a book covering the impressive financial success of Israel:

If an entrepreneur has a business idea, he should start it that week.

Stop preparing. Stop building features for your clients who aren’t even there yet. Just stick a Beta Version next to the brand’s name and go to market. Good enough is good enough.


If given a choice, take speed over quality. Nothing worse than an uncertain, perfectionist Captain fighting the storm.

What to Do When Failure Comes Knocking

After your business fails, here’s what you need to do:

Find comfort in the facts and figures given in this article

Re-read them. Internalize them. You are not special. You didn’t make the first jump. You’re normal, and that’s OK.

Evaluate assets

Every business, no matter how bad, has some sort of assets. I.e., cars, equipment, office space, or maybe intellectual property, employees, or client base.

evaluate assets

Even if the business is making no money, you still had to have some clients, or maybe you’ve worked and had ongoing relationships with different companies. Those are still valuable assets. Maybe you have a nice commercial lease worked out. That’s a plus in any buyer’s eyes.

If you have a brand name, that’s awesome

Brands carry a lot of value for investors. I’ve seen business saved just because they had mass appeal thanks to their brands. Open up a spreadsheet and list all your assets.

If you aren’t happy with what you have, add another column. Call it “Experience”, and in the corresponding cell, write “Invaluable”. You’ll feel better, and it’s absolutely true.

Sell the assets individually or collectively as a business

Another scenario would be to give it away and keep a certain percentage if you think the business still has potential. If you have trouble finding a willing buyer or person to take over, consider these routes:

  • Contacting the competition
  • Contacting business partners
  • Asking your accountant or lawyer. They’re usually well connected.
  • Being honest and asking your employees.
  • Being honest and asking your employees if they know somebody.
  • Ads, forums, blogs, newspapers
  • Universities. Find a young, hungry wannabe entrepreneur. Give it away for free and keep a percentage.
  • Try gatherings or conferences from your industry. Don’t be shy.

The Last Step

Now you’ve sold it or gave it away and kept interested, sit down. Relax. Detach. Open the spreadsheet. Write the top 3 mistakes you’ve done while owning the business. Write the corresponding three lessons you’ve learned. Once you’ve done this, it’s time to restart.

Restart as soon as possible. You’re now closer than ever to being a successful entrepreneur.