Somebody would have not so big brain came up with that one. I don’t want to fail often. I would like to keep my failures to a minimum. I recognize that failures will happen. I’m fine with that. That is a part of the process. I have said failure is kind of like the speed bumps to success, but it doesn’t mean I’ve gotta go in a loop where I know there’s three speed bumps here and I keep going in this circle. I want to get out on the open road and kind of go forward a little bit. This idea that you can fail forward, I do believe you fail forward and that you can learn something from it, but this idea that you fail often and we kind of glorify it; I don’t like that. So I’ve kind of modified this and I’m going to explain it. Mine is Fail Fast, Fail Forward, and Fail Cheap. There’s two parts of mine that I don’t hear often: fail fast and fail cheap.
I interview founders all the time on my show and I’ve yet to interview anyone where this is kind of their very first start-up. Normally, there was something early on where there were some failure that kind of led them to the model that they’re currently using. That’s fast failure. They failed early and it led to where they’re at. Let me be clear, I don’t have this happen with people in their 50s. That somebody waited a long time to fail. I do think failing fast is kind of normal. Because you’re out there, you’re trying something. So in creating your start-up, statistically, it’s your second startup that succeeds. Well, why is it? Because you fail fast. You tried one, you didn’t have maybe everything you needed in that start-up, and so it failed. You either started it with not enough capital so you didn’t have enough runway to make mistakes, or you did it with some friends and family. It was just poorly staffed or you went forward with an idea that wasn’t validated, and so the marketplace didn’t warmly receive it the way you had hoped.
So that’s failing fast.
You know, early on I had success with a certain business model regarding service companies, and it worked great. Then I failed fast, in that I failed sub-35 years old, because I tried a retail store. We’ll get into that later. Well, that actually has saved me money because where I’m at now in life, I could lose exponentially more than what I lost back then. It hurt like a son of a gun and I was not all that happy about it, but it was a fail fast situation.
I failed early on in my entrepreneurial journey because I was filled with hubris. I thought, well, if I can make this kind of company work, well, then I can make that kind of company work. That’s a podcast for another day. That’s the idea of failing forward because I know that doesn’t work.
What I want you to understand is, I encourage you to fail fast. And what I mean by that is, don’t wait. Get moving on whatever you’re going to do. There’s no perfect time. You’re never going to have everything in place and even if you fail, a fast failure is acceptable.
Why? Because you are going to fail forward. You’re going to mine for gold. You’re going to learn things through this failure that’s going to make the next business better. What I mean by that is, I look at my failures and I learn something.
I’m going to give you three really quick lessons that it made me a lot of money and kept me from losing a lot of money.
Partnerships, I had to buy somebody out of a partnership, and I felt like I gave them much more money than they were worth, and I learned in partnerships to a peanut. So my partnership agreements now are much stronger. I learn in partnerships that somebody has to bring something valuable to the table and they need to continue bringing it day in and day out of the business as they can’t all of a sudden take up golf three years in and stop fulfilling their responsibilities. I learned business partnerships are very much like a marriage, and it’s not a bad idea to get a pre-up.
Text thing I learned is, is that I don’t like retail businesses. Well, because it has too much dead money because you have to keep inventory. You typically have high rents because for retail, you gotta be in a high traffic spot and they’re typically very expensive. What I really don’t like about them is the rental agreements for 10 years. And you gotta build it out, so you might put $100k in to make it accommodate the type of store you want. Signage is $10k. That’s dead money. I’d rather put that into marketing a service company
Don’t Kill the Golden Goose
Next, I learned that you don’t kill the golden goose. What do I mean by that is because I failed fast and I failed forward, what I learned early on is that I would take a successful venture that I had and then I extract all the money from it to start another venture that I thought would be great. And that one would fail and it would kill the golden goose, the one thing that was working.
Now, I don’t do that. I don’t co-mingle the money. Or I put a finite amount of money that’s going to be used, because if this next company doesn’t create profit, that’s. If you ever listened to my mentoring series, it’s called The Law of profit. It reveals a good idea or a bad idea. If we’re not making money, it’s a dead idea and we’re going to stop it. But what we tend to do is use one existing profit stream or something that’s working and it tends to fund something that you hope will work, but isn’t working. It’s failing the Law of Profit.
Example, company A will lend start-up B $10k, but that’s it, and company B will pay back Company A $12k. It’s like a true loan agreement, so if we’re not making money, boom, it’s over. But it’s not a never-ending process where we’re hanging on to this hopeful venture for three years. You never kill the golden goose and you don’t take attention away from the golden goose.
I kind of went into this a little bit, but I never go all in on my idea. I beta test things. I test it at a very small level to see if it’s resonate. All I’m trying to do in a new venture and a new startup is to get a pulse.
Is it working? Is there a marketplace? Is the marketplace responding? I’ll do a test. I’ll set up a beta test company where all I’ll buy a phone number. I’ll run a post card to our target market, let’s say 5k potential customers and look and see if the level of responses work, and I will scale the business immediately.
I can get that plane on the runway fast if there’s great interest, but what I’m not going to do is put all this money in something I haven’t tested.
So what have I done? I’ve learned how to fail cheap. I beta test it or I start a micro-business as the smallest possible version of what I hope the company will be, and I give it a fixed measurable. I give a deadline and I give a fixed amount of what I’m willing to put in this investment, and once I run out of the money that I’ve decided I’m putting into it, it’s over.So I’ve already pre-determined the bail-out point. It removes emotion.
Fail fast. Fail forward. Fail cheap.