The life of an entrepreneur is glorious but it certainly ain't glamorous and the road to success is paved with failures along the way.
Success and failure in all forms share one thing in common. They are opportunities for your true character to be publicly displayed.
Failure reveals and hardens your character and success will expose it. Put another way, success and failure don’t change you, they merely make you more or less of who you already are at the core.
Great athletes sometimes have the most spectacular falls. Outfielders ruin their shoulders, football players tear their ACLs, and boxers grapple with neurological damage. The blows to their careers don’t make us think less of them; we even admire how well they handle such difficult situations.
And this is exactly how we should view business owners who encounter bankruptcy or a business failure. This is just part of what we lovingly refer to as the grind!
Bankruptcy isn’t fun and any form of failure never is. Bankruptcy (like surgery) is just a part of getting back on the field in certain situations. Like surgery, it should always be a last resort, but it isn’t the permanent blemish many assume it to be.
Bankruptcy, though painful, offers perspective: The thrill of victory is enjoyable only when you have something visceral to compare it to. Furthermore, living your life by what’s determined by three private data houses, which exist not for your benefit but for their corporate subscribers, is a faulty paradigm.
People who are essentially bankrupt frequently shun filing to avoid shame and fear.
I had a bankruptcy in 2008. While I didn’t set out to have a business partnership to become destructive and vulnerable to market changes, I was responsible for making the choices that ultimately ended our venture. Nobody plans to get injured or go bankrupt, but once you find yourself there, the only attitude that works is one that propels you toward making the right choices. You have to learn from the past, rather than live there. You have to focus on the outcome, not the obstacle and rise and grind through till you achieve it.
How to rebound
In 2008 one of our largest business investments failed and forced me to file Chapter 7 because it was structured as an S-Corporation (pass-through entity) and all of the institutional debt and liabilities rolled up to me personally after the partner bailed and filed his own Chapter 7.
As I started again after bankruptcy, I didn’t waste energy on strategies that required a credit history. A great credit score isn’t necessary to develop a solution for the marketplace. The best thing about building a business when you have limited capital is finding a new level of creativity in your mind; you become more aware of what your customers value, and become laser-focused on pragmatic ways to fill that need.
To build a business from the ground up without capital or credit, you have to focus on what needs you can fill today. As profit comes in from that, you allocate the profits to expanding the offering — you literally bootstrap your way forward. Once something shows promise and the ability to scale into high demand, capital will follow, and nobody will ask for your credit score — it’s irrelevant to the fact that you have a solution people want.
Bankruptcy improved my relationships with not only my spouse (even though healing takes time and commitment from both parties), but also vendors. It helped me face the music and make things right by asking each situation how I could make it up. Surprisingly, many told me to just do something better next time. I was humbled and became a more responsible and empathetic businessman. I was grateful to start at “zero,” rather than below ground level.
Make the call-Each failure is different
2008 wasn’t my first failure. My first business, founded in 2000, never was revenue-positive; by 2003, I was over $500K in personal debt. I spent two years working non-stop, doing office work during the night and serving as a ditch digger (manual labor construction) by day. I flipped a few properties on the side and flat out hustled 20 hours per day until I paid everything off in 2005; it was the right thing to do in that circumstance. In 2008, it wasn’t because the capital stack was institutional investors who had collateralized assets and my counsel advised me to file for an official discharge. The point is over time you will have more success than failure, but when you fail and start over you need to wind things up appropriately on a case-by-case basis.
Some people have a lax work ethic and will file for bankruptcy or run away from their issues when they should be digging ditches to make it right. Others will resist filing when it’s inevitable and pay an even more expensive opportunity cost delaying a fresh start and missing their next opportunity to win. If a person hasn’t taken responsibility for what brought him to this point or hasn’t forgiven himself for making bad decisions, that’s the starting point.
BOTTOM LINE: You can’t win if you don’t know how to lose with class.
Emerging from bankruptcy or any level of failure is your opportunity to redefine your life and what it means for you to win. Grab it and straight up grind!
(updated and revised by the author from an article originally published in the Washington Post Business Section in 2010)