10 Life Lessons From Losing $6,537 on a Failed Business
If you want to start a business, avoid these mistakes.
Sometimes, you have to lose in order to learn a real life lesson.
Many successful people, mentors and life coaches will even tell you that failure is a great teacher. I don’t romanticize failure, but some of my most impactful life lessons have come from my biggest blunders over the years.
For that reason, and because failure is an inevitable part of the entrepreneurial journey, it's important not to let them pass by without taking away a key life lesson or two—with the goal of avoiding that same kind of failure the next time.
My First Failure (Life Lesson) as an Entrepreneur
My own biggest professional failure as a young entrepreneur taught me the fundamentals of running a product-based business the hard way. But in the end, much of the success I've had since then, is built on top of the life lessons I got as a first-time business owner.
My first business began when I invented an iPhone lookalike stash device and became a novelty product seller back in 2009 while I was still in college. My lightbulb moment came as I was at a concert in Los Angeles and saw one of my friends getting his stash confiscated by security. I was standing just on the other side of the entrance, picking up my phone and wallet that had been passed around the metal detectors.
That’s when the gears started turning in my head. I looked down at my iPhone and thought, "what if we had a stash device that looks just like a phone?"
And thus my almost successful business idea—the iStash—was born.
I built a few prototypes and soon had a case that looked exactly like an iPhone, but stored your cigarettes, lighters and other items you wouldn't want prying eyes to discover.
Over the next year, I brought the product to life out of my own stubborn drive to follow through and actually build something—despite having no real experience in business and zero proof that other people would want the product once it was real.
I scoured the Internet for marketing ideas, asked friends to help with design, connected with manufacturers from China and went to trade shows around the country.
At the end of the day, I spent more than $10,000 of my own money (that I barely had) getting the iStash produced in China, promoted through trade shows, featured in the media and sold online. More than 6,000 people bought the product, but I eventually needed to decide between investing more to try and grow the business or fold up shop while I was still $6,537 short.
Feeling exhausted and confused about how I could sell thousands of products and still not turn a profit, I opted to shut the business down before digging an even deeper hole.
Here are the 12 most impactful life lessons I learned by losing $6,537 on this business:
1. Only Work on Ideas You Genuinely Care About.
Running a business takes time and a ton of effort. No matter what, you’ll eventually become miserable if you’re venturing into something that doesn’t personally interest you. Never pursue a business opportunity just because someone tells you it’s a good idea. Look inward and decide whether or not the idea resonates strongly with your passions, hobbies, skills and interests.
If it doesn’t, better look for something else that does. A recent CB Insights study found that more than 20 percent of failed startup founders attribute their failure to a lack of genuine interest in the business. This lack of interest was a major factor that contributed to the failure of my iStash business.
2. Get to Know Your Target Audience First.
Identify who your target audience is for the solution you want to create, and build a community around your idea. Start conversations, poke holes in your idea and gather feedback with the goal of providing the best possible solution to the people you're seeking to help. Gauge how your audience may prefer certain features over others, and determine which challenges might be a good starting point for a new business idea. If you're validating a specific product or service, find out what it will take for your audience to actually purchase from you.
3. Focus on Your Strengths, Ignore the Rest.
You won’t go very far in business if you're relying on a skill that's not very strong or when you're operating in a space you know very little about. Doing so takes away one of the best advantages every entrepreneur covets: confidence. Being good at what you do instills confidence, enables you to innovate and unlock more creative solutions simply because you're in your element. If you need other skills to successfully run your business, choose to outsource those tasks, bring on a partner, hire talented help or delay work on them until you absolutely need to.
4. Validate Your Idea With Paying Customers Before Spending Money.
You don’t need to pour all your resources to a business idea just to know if it's going to work. Given the tools now available, that’s a costly move that won't even net you the right results. Test whether or not there’s a healthy market for your business by building your early feedback group, providing value and asking them to pre-order your full solution.
5. Don't Create for People You Don't Truly Understand.
Building a business usually starts when you match a solution with a group of people willing to pay for it. Your mother’s book club may have dozens of great members, but they’re probably not the market you'd tap to test out your tech-related app with. Start with the subset of people you know and focus on a pain point you have a deep knowledge of. Create customer personas and understand their needs, as well as the process that leads to their buying decisions.
6. Have a Go-to-Market Plan.
What's the point of pouring your precious time and money into a business if you're not going to have any paying customers on the day you launch? I barely planned at all when I first set out to build my iStash business, and that caused a lot of serious hiccups along the way. I worked my way through each stage of the business as it came along, without worrying about the important details ahead of time—like how I'd actually be able to sell more than 6,000 of these products. Because of that, I was constantly scrambling to figure out what I'd do next, rather than having at least an outline of how I'd get to the next stage. If I would've planned ahead, I'd have anticipated many of my biggest setbacks and could've made better-informed decisions.
7. Use Your Relationships.
By sharing your vision with the people who are closest to you—and the community you're building around your idea—you're making yourself more accountable for sticking to your word and committing to your success. Sharing also creates new opportunities through which you can gather valuable feedback, have others assess the viability of your idea and you can even get surprisingly helpful connections and introductions when sharing with the right people. When I built the iStash, I shared prototypes with my friends, family, co-workers and online buddies. One of these friends actually connected me to the Chinese manufacturer where I ended up producing the product, while another was a writer at a popular product review website who helped drive traffic to my online store.
8. Don't Get Emotionally Attached to Your Idea.
Being my first shot at entrepreneurship, the iStash drew an inordinate level of focus and emotional attachment from me. I was so personally invested in the success of the business idea that I erroneously equated its success or failure to that of my own as a person—to fail means personal embarrassment in my mind. Never make this mistake. Being too attached can cloud your judgment and might prevent you from assessing things objectively. You’re not a business idea and you’re not the sum of your failures or successes. Ditch bad ideas as fast as you can, listen to what your community is telling you and move onto the next opportunity whenever you can.
9. Be Brutally Honest With Yourself.
Demand honesty from yourself and from the people giving you feedback on your idea. That’s another big mistake I made with my iStash business—being too positive about my idea and encouraging the same from my inner circle did not help me in the long run. It's what held me back from entertaining the simple, obvious question, “isn’t it weird to have two iPhones with you?” If I had been brutally honest with myself and willing to encourage that kind of feedback from others around me, then, I would have come up with a better solution for my customers, rather than pushing forward with my idea for the sake of bringing the product to life.
10. Get People Excited.
In this day and age, a boring product is a dead product. You have to stir people up and spur them to action with your solution—there's simply too many outside demands for our attention not to. If you don't, more aggressive companies and even more exciting products from your competitors will likely grab people from your customer base. Fortunately, people are spending more and more time online today, and you have a wealth of tools like social media, email marketing and blogging to keep them engaged on a regular basis. Understand your audience and be creative at keeping them interested in your brand.
Learning a Lesson the Easy Way.
Everyone makes mistakes and it's these mistakes that are often our biggest learning opportunities, but you need not repeat the mistakes others have made—when you can avoid it. Learn from the mistakes of others to spare yourself the expense and the experience of real, unsettling pain.
Better yet, train yourself to validate your business ideas before diving all the way in. You'll save yourself a lot of hard lessons.