Business Rx: Don’t be afraid to fail in 2014

If you’ve been dreaming of starting your own business, make 2014 the year you take the risk — even if you fail. Whatever happens, you’re guaranteed to learn a lot in the process.

This is not new advice in the larger start-up world. The Lean Start-up movement urges entrepreneurs to fail fast and fail cheaply, and the blogosphere is littered with “Diaries of My Failed Start-up XYZ.” My Twitter feed is full of Top 10 lists of lessons learned. It’s a concept we have come to embrace here at the University of Maryland’s Dingman Center for Entrepreneurship, where we’ve had two recent reminders of just how fragile start-ups really are.

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Take Reed Street Productions, a 2012 winner of our Cupid’s Cup business competition. Last October, the company had to cancel its Run For Your Lives “Zombie Infested 5K Obstacle Race.”

Back when it won Cupid’s Cup, the company enjoyed first-mover advantage in the booming zombie racing industry (I guess you could call it an industry). It benefited from the popularity of the undead and immortal-themed shows such as “The Walking Dead” and “True Blood.” Unfortunately, over time, the hype didn’t draw enough racers, competition increased from other themed runs and blood-splattered event production proved too expensive for a start-up business to maintain.

Around that same time, the Dingman Center team heard the news that our 2013 Cupid’s Cup winner, Earth Starter, is going through a divorce. Like many partnerships, the founders have decided to part ways (not to worry sustainable urban gardeners — you now have two choices — Nourishmat and UrbnMat).

Of course, the fate of our past winners makes for horrible timing as we scour the country for this year’s Cupid’s Cup applicants. What should we say? How can we market around this? Would there have been “American Idol” without Kelly Clarkson?

Upon further reflection, we realized that instead of mourning these setbacks, we should embrace these stories and let our failure flags fly. We all know the stats — at least three of four start-ups fail. That number is even higher for student start-ups that are typically founded by first-time entrepreneurs with little or no operating experience. On the other hand, we have strong success stories from other competition winners.

The reality is that if we teach entrepreneurship, we can’t only celebrate success, but must encourage our students to learn from other’s missteps. At the Dingman Center, we will remind the next cash-intensive business to stay focused on its bottom line and we will insist that students understand their equity positions in 50/50 partnerships.

The truth is most start-ups are the undead, just one step away from the grave and very, very few are immortal. There is probably more to learn from the zombies than the vampires. However, failure is not in the vernacular of the ivory towers or in most of us for that matter. As universities are increasingly funding innovation and entrepreneurship initiatives, and searching for success stories to demonstrate their return on investment, we need to remember that start-ups are like other experiments, some succeed but most fail. The story isn’t over for Earth Starter or Run For Your Lives. Both Earth Starter founders are pursuing similar businesses, while RFYL races will live to see another day under a different management company.

So make taking a risk your New Year’s resolution. Understand your affordable loss — and do what you can do to mitigate risk before you start. Learn from the stories like those above and build a strong support system. Then at some point in 2014, get off the fence.

Elana Fine is managing director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. She regularly offers her expertise to entrepreneurs starting and growing businesses. Capital Business and the experts at the Dingman Center and the Smith School are ready to assist entrepreneurs looking for advice. Contact us at .

 
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