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Failure Isn't Fatal

Entrepreneurial ventures fail. It's a sad fact. How your business fails will determine whether you get another shot at success.

Opinions expressed by Entrepreneur contributors are their own.

In early 2000, Thea Snyder was riding the crest of the internet wave. Her company,, promised to connect movers with utilities and services all across the country. She had nearly 20 employees, $1.5 million in funding and heavyweight clients like and AT&T.

But Snyder was worried. A few big names notwithstanding, service providers weren't signing on quickly enough. With cash running low, Snyder tried everything she knew to keep the venture afloat, from hiring an outside CEO to changing the company's name. In the end, however, she knew there was only one call to make.

In January 2001, she pulled the plug on her brainchild, a that sent shockwaves through the close-knit community in Albany, N.Y.

"This is not like Silicon Valley where businesses fail every day," she says. "This is the conservative Northeast, where you just don't talk about failure."

Fast-forward to 2008, when a slow has many entrepreneurs worrying about the possibility their business could fail. With bills piling up and banks knocking at their doors, some business owners will spend their last dollar pursuing a dream that has turned into a nightmare.

Big mistake, says John L. Herman, an author and consultant who has worked with more than 1,000 troubled companies.

"Failure isn't fatal," he tells his clients. "If you hear the smoke detector going off in your house, you run. So why do we ignore the alarms when it comes to business? If you heed the alarm and get out quickly enough, you can avoid getting burned in the long run."

That advice directly counters the rah-rah attitude of many so-called experts. Do an internet search on "small-business failure," and you'll be hard-pressed to find any sources that even acknowledge such a possibility.

"For successful owners, failure is not an option," insists one site for a business incubator. Another long-time business blogger says, "Forget failure, let's focus on ." But this blind-sightedness could be fatal for your present business--and any you may create in the future.

"Look, doesn't stay in every stock he buys," Herman says. "The same applies to entrepreneurs. The notion that you hang in there until you die is insanity. My philosophy is that you do all the things under your personal control. Then if the marketplace is telling you it's not going to work . . . you take your marbles and go to the next game."

Getting out of "the game" can be tough, says , a serial entrepreneur in Boulder, Colo. Despite having three successful companies on his resume, he says it was painful to fold iContact, his mobile social networking platform.

"Most founders are eternal optimists," he says. "We kept thinking, 'We can make this work,' even though all the signals were indicating it wasn't the right time for this product."

Cohen says the end came when he and his partners had burned through their own capital and started spending their investors' cash. Though Cohen could have spent that money to keep iContact afloat, he decided it was wiser to keep his investors happy in hopes they'd support his next venture.

"Make the decision quickly," he advises. "Don't burn through your investors' cash. We admitted our failure and returned 80 percent of investors' capital. That's a pretty happy outcome for a 'failed' ."

Thea Snyder says some of her investors offered cash for her next venture after she closed without declaring bankruptcy. In the end, however, she decided to go it alone with Nitoc LLC, her successful software consulting venture. She now has complete control over Nitoc--and complete peace over the end of 1call4all.

"I can look at myself in the mirror and say I honestly couldn't have done it any differently," Snyder says.

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