How to succeed at failure

Recognizing failure
and recovering from mistakes are essential skills for any entrepreneur. When I
recently received several excellent questions from readers of Entrepreneur
magazine and American Express Open Forum, it prompted me to reflect on how I’ve
dealt with missteps in my own career.

 

Q: I’ve been an
entrepreneur for four years now and would like to know, when a business is not
going well, how to tell when it’s time to call it quits and switch to something
else? You have mentioned your financial difficulties at the beginning of your
career and as Virgin ventured into all kinds of media businesses. What helped
you decide whether you wanted to stick it out or change sails?

Victor Tan

 

A: The impending
failure of a business is something that you will instinctively recognize deep
down, but human nature may prevent you from acknowledging it. Most start-ups
are short of cash in the launch stages and then lurch from one crisis to
another as they struggle to keep afloat. In such situations, entrepreneurs need
to be strong-willed, confident without being cocky, and determined to make an
idea work, often against the odds.

I have lost count of
the number of times rivals, reporters, bankers and even my own finance
directors have told me that our time was up – but every time, I kept going and
tried another angle, thinking that our situation was not as dire as it
appeared. We have sold houses, hotels and even other businesses to raise cash.
Sometimes we expanded our way out of trouble by ordering new planes, signing
new bands or even buying new nightclubs.

However, you must
balance this dogged streak with a sense of realism. There will be times when
you must accept that despite your best efforts, an idea or business cannot be
saved. As they say, the first cut is the kindest – both to the venture being
set loose and to the parent company. Overall, it seems to me that if you have
been struggling to pay the bills and salaries on a regular basis; if you cannot
get traction with customers; if you can’t raise awareness of your product or
brand, then it is time to quit.

Some of the best
decisions our team at Virgin has made involved exiting markets early, when we
could see that our product, service or brand was not making a big enough
impression on customers, and would not break through and attract volume sales.
A good example of this was the Virgin Pulse digital music player. We founded
the company in 2004 and then folded it a year later when it failed to make
inroads against the major brands. The rise of Apple’s iPods and iTunes meant
that Virgin’s device suddenly looked out of date before we had even launched
it.

Sometimes we have
kept businesses going too long. Another venture impacted by the rise of MP3
downloading was Virgin Megastores. With new technologies stifling record sales
and retailers folding around the world, the business was losing a lot of money.
We did not make a speedy exit in part because I resisted closing the business.
I was worried about losing the flagship stores’ presence in Times Square and on
Oxford Street since they were so important to brand recognition and our link
with the past. But the scale of the losses meant that we had to sell the
business to its management and focus our attention on markets where we could be
the disruptor, not the disrupted.

 

Q: How do you regroup
when disappointment is overwhelming? Do you have a three-day funeral and then
get on with designing a new venture? What is your strategy?

Doug Warren

 

A: My mother drummed
into me from an early age that I should not spend much time regretting the
past. I try to bring that discipline to my business career. Over the years, my
team and I have not let mistakes, failures or mishaps get us down. Instead,
even when a venture has failed, we try to look for opportunities, to see whether
we can capitalize on another gap in the market.

Consider our
much-publicized attempt to buy the failing British bank Northern Rock in 2009.
After months of hard work, Virgin Money had put together what we considered to
be a strong consortium in order to buy the bank and refinance its debts. Prime
Minister Gordon Brown’s government thought otherwise and nationalized the bank.

I was astounded. I
spent a night drowning my sorrows with a few friends on Necker Island. But
within days the team had reassembled and we mapped out how we would set up our
own bank and then take on Britain’s largest financial institutions. We have
since bought a small U.K. bank, Church House Trust, which means that we now
have a banking license. The venture, Virgin Bank, has attracted the noted
American investor Wilbur Ross and we are busy planning its expansion throughout
the U.K. in 2011.

 

Q: What was your
favourite failure? What failure did you learn most from?

Meghan Blair-Valero,
Nantucket, Mass.

 

A: Virgin Cola was my
favourite. I got to drive a tank into Times Square and also to create a cheeky
bottle in the shape of Pamela Anderson.

That business taught
me not to underestimate the power of the world’s leading soft drink makers.
I’ll never again make the mistake of thinking that all large, dominant
companies are sleepy!

Richard Branson is
the founder of the Virgin Group and companies such as Virgin Atlantic, Virgin
America, Virgin Mobile and Virgin Active. He maintains a blog at
www.virgin.com/richard-branson/blog. You can follow him on Twitter at
twitter.com/richardbranson. To learn more about the Virgin Group:
www.virgin.com