5 Things I Learned From My Failed Business

A primer on how to move on from failure from an entrepreneur who's been there

Written by Wayne Vanwyck

It’s instructive to learn from our own failures. It’s more profitable to learn from the failures of others.

As a seasoned entrepreneur, business trainer and coach, I thought I could beat the odds. I knew the statistics: only one in three businesses with over 100 employees would be sold when put on the market. I knew that the plan to sell my 65-employee call-centre business had at least a 75% chance of failing. But I thought that because I knew the odds and I was taking small steps to prepare the business for an eventual sale, the stats didn’t apply to me.

“I’m smarter than most business owners,” I thought. “My intelligence, my positive attitude, my skills—they’ll protect me from a rocky economy and bad odds.”

In retrospect, my optimism was unfounded. Even when my management team warned me we were in trouble, I still refused to believe it.

We were already losing money when we lost our biggest customer. I wasn’t totally surprised; there had been warning signs. I knew we were vulnerable and had been telling my management team for at least four years that they needed to diversify our customer base.

Read Don’t Wait Until It’s Time to Sell: Set Your Business up from the Beginning

Then, two years ago, we had our best year ever because of one major client’s increase in business. Wasn’t that seductive. “Yes, we know we should be diversifying, but look, we’ve done really well this year!”

There were a inquiries from interested buyers at that point. But, while I was mentally ready to sell, there was still some underlying work to do. I didn’t have my numbers nailed down and gave a few different estimates of EBITDA, which scared off those potential buyers.

Read: How the Sale of Your Business Can Go off the Rails

So, we enjoyed the successful year we were having. Bonuses were paid, new equipment was purchased and new supervisors were hired and put on salary. We increased our infrastructure and everyone felt good—everyone except me. I was concerned about relying so heavily on one account.

Then the client started to back off. It changed its marketing structure and our work was cut in half. Other clients in another vulnerable sector were also shrinking back. The market we had grown our business to serve was itself in trouble, and we started losing money.

At that point, we took action. We bought new equipment that promised to double our productivity; we tried changing markets and put significant effort into securing new customers. But it wasn’t enough.

When the customer that represented 60% of our business told us they didn’t need us any more, that was the final nail in the coffin.

Read: Crash & Learn: Successful Entrepreneurs Share What Failure Taught Them

Within 30 days, our 17-year-old business closed. I had no choice. We gave employees notice and paid them. We practically gave away furniture and equipment to anyone who would remove it from the office. What had been an asset only 24 months earlier had become a liability. It was the hardest thing I’ve ever had to deal with.

I’ve owned (and still own) a number of businesses, and the call centre is the only one to go down in flames. There’s a little comfort in that. But there are plenty of stories about successful entrepreneurs who failed again and again before finally getting it right. They learn from their mistakes and grow. I know I’ll do that, too.

Here’s what I learned from this mistake:

  1. Don’t underestimate the role that good or bad luck can play. You can’t control everything—even solid plans can fail when you’re hit with an outside event. Not even behemoths like Lehman Brothers and BlackBerry are invulnerable.
  2. Your business should always be sale-ready. You never know when an offer might come your way. If you’re prepared, you’ll know how to take advantage of that opportunity.
  3. Don’t tolerate pushback from your managers if you know something has to change. I knew we needed to diversify. I put it in my business plan and introduced bonuses based on it, but we became more vulnerable instead of less so because it was the revenue path of least resistance. I should have been more firm.
  4. Give yourself a few years to prepare your business for transition. There’s a lot to do to get it right and there’s no downside to starting early.
  5. Know when to cut your losses and get out. Assess the situation to determine if it’s blind optimism or objective confidence encouraging you to keep going. Ask for—and listen to—outside advice from someone who really understands business.

In retrospect, I should have pulled the plug at least six months earlier than I did. The writing was on the wall. Why didn’t I? Because of my pride and unwarranted optimism. I thought I had the ability to make the business better. I was wrong. Maybe with another five years we might have been able to do so, but we ran out of time. At least now if I’m ever caught in the same position, I’ll be much better prepared.

Read: The Fruits of Failure

Wayne Vanwyck is the founder and CEO of The Achievement Centre International in London, Ont., and Callright Marketing Services in Kitchener, Ont. He is the creator of The Business Transition Coach Forum, the author of the best-selling book Pure Selling and his recent book The Business Transition Crisis: Plan Your Succession Now and Beat the Biggest Business Sell-off In History. He has been training and coaching business owners for the past 28 years.

More columns by Wayne Vanwyck

What are the best lessons you’ve learned from a failed business? Share your thoughts by commenting below.

Originally appeared on PROFITguide.com