There are only three kinds of entrepreneurs. Those that will fail. Those that have failed. And those that lie about it.
I have failed. And it hurt…
Fresh off the heels of building a business at hyper speed for five straight years I rolled into my next venture as someone with the reputation of King Midas. I think that was an overstatement though, because I had experienced failure, just on smaller scales or very early on. So I was able to keep the impact minor and bounce back quickly.
So when I failed in business, it was tough to take. And I can assure you that it wasn’t for lack of effort. I can out work and out hustle most people. The reason was far less obvious than that…
I’d acquired this next business using my money, a bank’s money, and a small carry back from the seller. Later, I took out a note for some operating capital from an experienced and sophisticated investor who’d invested in me before – and he’d done well on that investment.
I thought I’d timed the acquisition perfectly. By historical standards the second quarter off the bottom of a recession is a great time to buy. That’s exactly when I stepped into this business. I was expecting to have the tailwind of an economic rebound at my back.
So in my favor I had solid experience do draw on, a substantial amount of self-belief, and we were no longer technically in a recession. I easily got the financing I needed for the business.
It turns out that I was now the owner of what those in the financial world call a Black Swan. I could easily count four or five major contributing factors outside of myself that lead to the failure of my business.
Among them was the fact that my bank was being choked by it’s parent holding company for every dime of profit to save 28 other banks they owned which were failing. It would eventually be saved by a car dealer who bought it from the holding company.
I also had the misfortune of SB1070 passing at the time which drove thousands of would be customers out of my market.
And the Cash for Clunkers program that took many cars off the road that I would have serviced.
And for the first time in my lifetime a President called for the recall of a major automotive brand which took out yet another segment of my customer base.
Finally, all of this occurred within months…
It would be easy to say it wasn’t my fault…
But if you’re a fan of Shark Tank, which I am, then you know who Daymond John is. And one of the things he’s real clear about is that failure in business always lies at the feet of the entrepreneur.
On the day I realized that the ride was over I sat in my office going over everything that had happened and every counter move I’d made to deal with each of the problems I’d encountered.
Over the previous eight months I’d grown the business 80 percent. Sales increased every month until one day they fell off a cliff.
It was time to call my creditors and explain that I’d be shutting the business. I made each of the calls speaking to everyone in person. This isn’t the sort of thing you leave a voicemail about…
When I got to the call with my equity investor we went over each event that had occurred and how I’d reacted to it. At the end of the conversation he said, “Phil, I agree with every move you’ve made. The only way you could have avoided this was to just not be in the business.”
At that moment, that answer was actually a bit comforting. After all, this man had invested real money with me and it was gone.
Perhaps it’s the engineer in me, but over time, that answer didn’t sit well with me. It was a “non-answer answer”. And so I went into deep thought and introspection about the collapse of my business.
Had I done everything I could? Was there something I missed?
Throughout my previous venture we’d had a monthly meeting where we evaluated what went well and what went wrong on every project. We looked for lessons and improvements we could implement to make the business better.
I needed to do the same for this situation on a personal level. I needed to know why I hadn’t succeeded so that I could learn from it.
Being raised by an entrepreneur, I’m predisposed to entrepreneurship. It’s just what I’m wired to do. And I also believe that it’s okay to fail once for a reason, but not twice for the same reason.
Rereading the 2011 Inc500 issue of Inc magazine I came across the story of Trillacorpe Construction.
TrillaCorpe’s founders encountered problems that could have certainly killed their business. In a matter of months they lost over $5 million in new contracts and their insurance bond. Many construction companies have died for these reasons…
And yet here was Trillacorpe ranked No. 23 in the Inc500 after living through these problems.
The founder lost his car, his home, and couch surfed to save the business. Two of his partners declared personal bankruptcy because of the difficulties in the business.
And now the business was one of the fastest growing, privately held companies in the country.
What was the difference between their situation and mine?
What was it that allowed them to push through all the issues, to deal with the personal difficulties, and come out on the other side with a strong business?
What is the difference between one founder who will literally give up his home and couch surf to save his business and one who has chosen to keep his home and give up his business?
As I read through their story it was apparent that their business was in their blood. It was congruent with who they were. That congruence was fundamental to their success because it made it easy for them to be passionate about their business.
Thinking back to my business there was a component of it that I didn’t enjoy. That part of the business solved a problem for my client, but created a problem for someone else.
While extremely profitable, I didn’t enjoy that aspect of the business. It wasn’t congruent with who I am, how I look at the world, and how I conduct myself. It created a small bit of doubt as to what I was doing in that business.
The smallest bit of doubt can be enough to eat away at your passion. I’m passionate about building businesses. I’m dispassionate about creating difficulties for others.
The difference between someone who pushes through big problems and someone who possibly doesn’t make it through those same issues is a lack of passion.
I’ve seen this theme play out time and again in many businesses. Passion is the one element that lets you hang on by your fingernails just long enough until you find a solid lasting solution.
Passion stacks the deck in your favor.
Passion is that one thing that allows you to push through in the face of what others see as insurmountable odds.
Passion is what will make your story of success so enjoyable for others to read.
And the building blocks of passion are congruent behaviors.
You achieve congruence when who you are and how you do what you do line up with each other. This means knowing what your core values are and realizing how and when situations challenge your core values.
And this was my Achilles heel in this business. Part of the business model challenged my core values and how I wanted to be known. That’s not to say that we were doing anything wrong because we weren’t. It just wasn’t lined up with how I see myself serving others.
I have a great passion for building businesses. But that passion by itself was not enough to overcome a multitude of external challenges that were accompanied by components of the business that were incongruent with my core values.
And so when my business faced incredible difficulties I made many attempts to save it. I visited several banks and pushed to try and add even more clients faster.
Looking back and reviewing my inability to find a way to push through, and accepting that as the leader in my business the responsibility for its success or failure lies with me, I have come to the conclusion that a lack of congruence eroded my passion in this situation just enough to cause me to stop short of finding a lasting solution.
Is complete congruence possible at all times? Likely not. But when something about your business challenges one of your core values to the point that it erodes your passion, that’s perilous to your success and you need to take note of it.
Take the steps to evaluate what it is about your business that’s bothering you. Once you’ve identified what it is, set a plan to change your business, and don’t hesitate.
Your business is an extension of who you are. It’s how you serve others. Your business is about the problems you live to solve every day. That’s why it’s so personal.
I will never again enter a business that isn’t fully aligned with who I see myself to be. I’ll simply pass on the opportunity.