I love business and have experienced many business failures. People often say, ‘Failure is the mother of success.’ This saying is neither wrong nor entirely right, because I have seen many entrepreneurs who, after stumbling, could not get back up and continue.
Every time we fail in our own business, we lose a great deal of resources.
– Regarding Time: we devote a great deal of time to our business without results.
And as you know, time is extremely precious, because entrepreneurial enthusiasm often declines with age.
– Regarding Money: no business failure is unrelated to financial loss.
At the very least, you have lost the money invested in your business's facilities, and when you fail, you will be very lucky if your financial position is zero. In reality, many of my friends had to start from a negative balance after failing, and I was no exception. In today's economy, every bit of money earned is extremely precious.
– Regarding Psychology: this is an intangible loss, but the greatest one.
When starting a business, we are full of desire, passion and ambition. Then, when we face failure, we confront a series of thoughts: “I am so inadequate,” “I am so useless,” and so on, not to mention the piercing looks of friends and family. Scornful remarks such as “I told you so…” constantly torment us.
The psychological barrier is the most frightening of all. I have seen many friends unable to break through it and start again after a setback.
Although many books praise failure, be careful: it is better to avoid failure while still achieving success. That is the best outcome. If you love failure, you had better have plenty of money, plenty of time, and nerves of steel.
I say this because every time a startup of mine failed, it usually took me 1 to 2 years to recover and start again. Later, looking back, I realized that many of my failures had happened in very foolish ways. In fact, these failures could have been avoided entirely.
Experiencing failure and then success is good. But better still is observing and learning to avoid failure. We do not have to touch a 220-volt electrical source to know that electric shock is harmful.
The same goes for failures: many startup failures are repeated, and by observing carefully and learning sincerely, we can avoid failure and save enormous resources in both time and money.
I have failed many times, but I would like to share 3 stories of my failed startups and the lessons those failures taught me. I hope you can avoid the failures I experienced.
The first startup story
I studied at the University of Foreign Languages, now Hanoi University. As students, my classmates and I already had translation contracts. The rate then was VND 50,000 per page. What is worth mentioning is that the definition of 1 page was extremely flexible: translation companies gave us A4 sheets with margins pushed to the edges, font sizes never 12 but only 10, and, especially, no paragraph breaks.
After graduation, although I had a full-time job, I continued translating outside working hours with better contracts—fewer words and more money. Sometimes I did not have enough time to translate alone, so I shared the work with friends and we translated together.
At one point, I sat with two friends and said: ‘We should start a translation company. Go back to the university and find good students. Share translation work with everyone. We will treat students better, take on more large translation contracts and earn more money.’
And so we set about establishing a Translation Center, working hard to design a logo, build a website, print business cards, and so on, with hopes for a bright future.
The center struggled on for a few months before closing.
Causes: None of us decided to quit our jobs to work full-time on our business. All three of us had stable jobs with good incomes, and when we began the translation project, none had enough time to run two jobs at once.
Lesson: Later, I met many friends, witnessed many startups and was invited by friends to join various startups.
The first question I always ask is: ‘Who will commit full-time and stake everything on this project?’ If everyone participates only part-time, I will immediately stop cooperating, no matter how experienced or highly qualified the team is. Starting a business involves a great deal of thinking, but many times more hands-on work. You need people willing to roll up their sleeves and work hard with total commitment before success may smile on you.
The second startup story
A friend I greatly respect in technology invited me to start a business. It was 2008, when the e-commerce wave was still fairly new. The field? ‘ERP—enterprise management software.’ My friend said: ‘This is the field of the future. Businesses will manage all their personnel, accounting, and so on on an ERP platform.’
Honestly, at the time I did not even know what ERP was. I only vaguely remembered it from reading so many books about Bill Gates, Steve Jobs, and Micheal Dell, and being captivated by billion-dollar startup deals in glamorous Silicon Valley.
My friend quickly persuaded me by declaring, ‘This software costs tens of thousands of dollars overseas. I can make it for just a few tens of millions.’
The dream of wealth blazed up, then went out after… less than 1 year.
Causes: My friend struggled endlessly but could not produce a demo. Meanwhile, monthly costs for technical staff, sales staff, rent and so on were very high.
Eventually, when the product was ready, we went out to sell it, but no company would buy it. Honestly, who would entrust their entire business data system to two kids with a company that had absolutely no market reputation?
Lesson: Later, when advising or directly participating in startups, I always asked: “How long until the product is ready?”; “What is the budget to sustain the company until the product is ready?”; and “How much will be spent on branding to persuade customers to buy the product?”.
If the 3 questions above have not been answered thoroughly, I will wait until the time is riper to begin.
The third startup story
After graduation, I worked in tourism. Seeing potential in restaurants specifically serving tourists, two colleagues and I decided to raise capital to open a tourist restaurant.
Because we had little capital, we decided to raise additional funds from friends and acquaintances who also worked in tourism. Partly out of a vague fear that, as the company grew, larger shareholders might seize what we had worked so hard to build, we decided that no contributing shareholder could own more than 20% of the shares. Many people invested, and the restaurant project took shape with an initial list of nearly ten shareholders.
After the restaurant had operated for more than 1 year, another founding shareholder and I withdrew our capital from the project.
Causes: The cause did not necessarily lie in the business. Operations were actually quite smooth, and the restaurant had reached all travel companies in Hanoi with a fairly steady clientele. However, the breakdown came from within the shareholder group.
Having many people is not a bad thing. The problem is that when many people contribute capital, you need fair and clear rules from the outset. Otherwise, clashes between big egos and the mindset ‘I am a shareholder, I am an owner’ will make the business spend so much time resolving internal issues that it cannot grow to a larger scale.
Lesson: Does that mean you should start a business alone? No!
Business stories place too much emphasis on individuals. Steve Jobs alone could not have succeeded without Steve Wozniak’s technical genius and Mike Markkula’s early marketing thinking. Bill Gates alone could not have succeeded without Pall Allan’s contribution in the early days.
When starting a business, we need a team. Notably, startup teams are often made up of friends. Friends usually have something in common. Having too much in common is good for café conversations, but is not actually good for a business at its beginning, because a working team needs people with different skills.
Ideally, a trio with Product, Marketing and Operations skills. These are three solid legs supporting a business through its early storms and toward future opportunities.
However, the greatest lesson from participating in startup projects was that, when I later began other projects, former shareholders were still willing to invest alongside me. This was because I made “financial transparency” my foremost principle throughout our work together.
You may fail through a lack of skills, luck, or both. Shareholders may criticize you, but you will still have a chance to start again, because the business journey is long for those passionate about entrepreneurship. But if you are financially dishonest, your chance to start again is very small. Nobody wants to join a business with someone who lacks financial transparency.
Collected
Chương trình liên quan tại YUP Education: X-Startup – khóa học khởi nghiệp «Khởi Chánh Nghiệp» · The Journey – lộ trình phát triển doanh nhân
