Bouncing Back From Failure: How Smart Entrepreneurs Do It

Roadmap to success.

You know the numbers: approximately 20% of startups fail in year one, and 45% — almost one in two — fail in the first five years. And what happens to the entrepreneurs who had launched those businesses and whose dreams were crushed by a hostile marketplace? Are they doomed to a lifetime of punching the clock at somebody else’s company?

Not at all. In fact, for many entrepreneurs, an early failure was exactly the learning experience they needed to launch another business that succeeded. There are lessons in adversity that just may help you triumph in your second startup — if you look for them.

Bianca Padilla, Carewell

About 10 years ago, Bianca Padilla had an intriguing idea: what if she set up a company that could provide children with a virtual piggy bank where relatives could deposit $10 for a birthday gift or $5 for an “A” on a report card — all happening online which means no sending cash in the mail?

Sounds good? It did. But within a year, Padilla shut down her startup, and, looking back, she saw two primary reasons for the failure. She did not know how to write computer code, and she did not know how to manage an engineering team that could.

Flash forward a few years, and Padilla was enveloped in a family situation. Her maternal grandmother needed a lot of care to stay alive, and she was helping her mother do the job.

It struck her that there was a lot she did not know about caregiving, from where to get adult diapers at a good price to how to care for the sores that often afflict those who need substantial personal care.

A lightbulb went off in her head: she needed to start an online marketplace that stocked all the supplies a part-time and untrained caregiver needs to help a family member and to offer it all at competitive prices.

She had no doubt about the numbers that would make the business work. There are 53 million caregivers in the US, and each one spends $7,200 out of pocket on supplies, she said.

Since most are doing this and also holding full-time jobs, they just don’t have the time to shop around dozens of stores hunting for what they need at a good price. What they needed was an easy-to-use, convenient online store to handle all their caregiving needs. 

But could Padilla deliver that website?

That’s where the virtual piggy bank failure comes in. After that failure, she learned computer coding, and she also thought long about the skills she needed to manage an engineering team. 

She dove into creating Carewell, and it took her three years to get it humming, but she personally built the website as well as the first ordering system — using the knowledge she acquired in the aftermath of the piggy bank failure.

Today she has 75 employees, she said and has raised upwards of $25 million in venture funding. How’s that for coming back from a failure?

Ryan Niddel, Business Strategist

Ryan Niddel’s business failure started with bright success. In 2014, Niddel was president of a web hosting company, Brainhost, that was bought by hosting behemoth GoDaddy.

Niddel was around 30, and of course, with that big score, he felt he could do no wrong. (Who wouldn’t?)

Niddel’s next move was taking his profits and plowing them into a payments processing startup, and a year and a half later, Niddel recalls, “I terminated all my employees, and I was flat broke.” He had poured upwards of a half million dollars into that company, and now he had nothing. His cars were repossessed. The house went too.

This was a crushing failure.

But Niddel wasn’t crushed. He admits the failure hurt — a lot. It took three years for him to rebuild his confidence — and, he says, between getting coached, getting therapy, and relentlessly absorbing new information, he little by little regained his entrepreneurial confidence.

Along the way, he spent time analyzing what he had done wrong, and it came down to spending too lavishly on both the company and his personal life. “I should have lived more modestly,” he says. He also recognized that he should have run the company much more efficiently.

As he thought about his business meltdown, he began to focus on EBITDA — an abbreviation for Earnings Before Interest Taxes, Depreciation, and Amortization. EBITDA, usually said to be a snapshot of a business’s cash flow, is much favored by analytical wonks but often ignored by entrepreneurs.

Niddel realized he had ignored it to his own detriment. He also realized he wanted to take another plunge into business, but he had soured on Internet companies. Instead, he set himself up as a traveling haberdashery salesman who sold custom suits to busy executives, and he made it work. “I developed an app that decreased the error rate on fittings,” said Niddel. That app, he added, is still used by upwards of 1,000 haberdashers. 

The downside was that the job kept him on the road a lot, and his fiancee complained that “we never see you.”

So he sold that business and started a CBD company that marketed and sold direct to consumers. A private equity firm bought it in 2018.

About this time, Niddel realized he was good at creating businesses, making them profitable — and selling them.

His scorecard as of today: he has helped with the acquisition or exit of more than 11 companies. He has learned to breed success — he has tripled the revenue of more than five companies, and he has added just shy of $1 billion in valuation to these companies.

Right now, he has interests in five different companies, including a roofing business and a business that sells supplements. 

He also runs the Niddel Group, where he is busy offering advice to other entrepreneurs

He uses that platform to talk about how his failure led him to success and, in addition to minding EBITDA, he advises entrepreneurs to do three important things:

  • Work with others: You go further together than solo.
  • Find a partner who can watch the downside. I need people who will say let’s look at the financial implications.
  •  Have a coach or mentor who has an unfiltered bias for your success. And be ready to hear advice that may not be what you want to hear.

That’s advice that has worked for Niddel. It just may work for you.

Ask Any Successful Entrepreneur

Have you failed? Most successful entrepreneurs — at least the honest ones — will admit they have. Maybe it was just a lemonade stand when they were 10 or a multimillion-dollar tech startup when they were in their twenties. Bottomline is that failure is a common stepping stone on the way to real success.

Don’t wallow in failure. Keep your eyes open for the next opportunities because what you have learned in failing just may have prepared you for that big success you have dreamed about.

Robert McGarvey

Robert McGarvey, a veteran journalist who has long covered startups and small businesses, created and hosts the CU2.0 Podcast for credit union and fintech executives which is at 120 episodes and counting.

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