Richard Branson on Failure -- the Most Dreaded F-Word
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Editor's Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. Ask him a question and your query might be the inspiration for a future column.
Q: I have been running a business for the last 19 months, and we have never made a profit. I have been wondering, at what point should we consider this business to have failed? -- Winnie Matimu
In business, failure is the true F word, and there is rarely cause to use it. If you have been running your business for only 19 months, then it certainly should not be considered a failure.
Your business's first few years are about survival. This is the most difficult period for any company: when just getting the bills paid is a challenge because you are still developing your products or services, recruiting team members, refining pricing, creating marketing materials and attracting customers. When you're tempted to give up, remember that it took many successful businesses years to become profitable. Some of the world's greatest tech companies took years to capitalize on their popularity with consumers and work out their business models. If you believe in your strategy and you have a realistic plan to reach profitability, then stick with it.
All successful entrepreneurs will tell you of dark days when they questioned their decisions -- use your worries to hone your strategy and your business's direction. If you're not seeing the results you need, it may be time to ask yourself some questions that will help you refine your plan and get your business on track.
Look hard at what you are doing: There may be some tweaks you can make to pricing levels, promotion efforts or distribution methods that will help bring in more customers and much needed sales. Ask: Is your product or service useful to your customers? Does it stand out from the crowd? Can it make a real difference to people's lives? Does it delight them? Is your venture's story compelling? Are your efforts to attract potential customers' attention to your business convincing?
It may also be worth going over your business's finances, to find ways to save money and buy your company more time to get things right. My parents always had to juggle their money when I was growing up, as Mum embarked on all sorts of entrepreneurial ventures. They taught me how important it is to ensure that your income exceeds your expenses, however small the margin. In Virgin's early days, I would try to sign every check that we paid, so that I had a good understanding of our costs and we could slow down spending.
But profit is just one way to measure success. At the Virgin Group, when we're making this kind of assessment, concepts like "friendship," "caring" and "love" are a lot more important to me than "gross," "revenue" and "turnover." The Bhutanese government sets a wonderful example. They measure Gross National Happiness, and one of its commissions is known as the "Ministry of Happiness." The logic is that happy people are more productive and innovative workers-- and such workers are more likely to meet with success, further improving those happiness ratings.
So you also need to look at whether your company is making a difference and having a positive impact on its staff, customers and the wider world. If your business has engaged employees and loyal customers, you'll likely start seeing profits soon.
Sometimes there is no alternative than to wind down a business. You should pay attention when your work stops being fun, since the burden of running an unprofitable concern will damage your personal life as well. If your industry is failing and your enterprise can't be rejuvenated, then you'll have to be creative as you work out how you can take the best parts of your struggling business and build something even better out of it.
We've had to close a few Virgin businesses -- Virgin Brides and Virgin Cola come to mind, which we wound down in a measured way. When this happens, it's important to retain the trust and respect of your customers and employees by bowing out gracefully and with dignity, doing everything possible to help those employees that you must let go to find new positions.
There's no shame in making such a move-- the best entrepreneurs usually have a few battle scars and war stories to tell. Remember to take the positives from your experience and apply them to your next business.
If you don't succeed at first, there's no need for the F word -- just pick yourself up and try, try again.