Five Ways Small Business Owners Can Harness the Power of Failure

As a small business owner, you strive for perfection. Nothing less than the best will do.

It’s important to shoot for the stars. It’s also valuable to recognize that an occasional failure to launch is key in the sequence of small business ownership. Learning to harness the power of failure can help you grow your business. Here are five tips for using failure to your advantage.

1. Acknowledge the Reason for Failure

It’s difficult—if not impossible—to avoid a future misfire without a clear understanding for the reasons behind previous failures.  

According to Amy C. Edmondson, Harvard Business School professor, failures fall into one of three categories:

• Preventable ones in predictable operations, which usually involve deviations from scope of work
• Unavoidable ones in complex systems, which may arise from unique combinations of needs, people, and problems; and
• Intelligent ones at the frontier, where “good” failures occur quickly and on a small scale, providing the most valuable information

A small business owner must first know the reason and category for failure to truly capture lessons learned and the power inherent with every fail.

2. Embrace Failure

It’s easy to feel good about yourself and your business when everything is going as planned. Conversely, it’s quite convenient to ignore failures. That’s a mistake.

Jeff Arce and Web Eby, owners of CrossFit Arlington Heights, purchased the successful training facility in August 2019. Buoyed by consecutive record-breaking months, the duo purchased a significant amount of expensive equipment. Then COVID-19 hit, with Illinois gyms among the first businesses forced to close and last to reopen.

“It was kind of devastation,” said Arce. “It was, ‘are we going to be able to survive this?’ We were chugging along and making some good money and things were moving in the right direction, and I remember sitting down with Nina, my wife and saying, ‘I don't know how we're going to be able to navigate this.’”

Eby acknowledges the enthusiasm-turned-anxiety offered “a good learning lesson,” and a fast-track to understanding how to turn what seemed like a loss into a win.

“We came up with a plan of attack to use the equipment. We trust our folks inside the gym and extended that trust to them with our equipment outside the gym," said Eby. “We had a day when folks could come in and check out equipment. We allowed them to take a kettlebell or a dumbbell, a band, things that they might need. And then we created at-home programming and led classes online and on-demand.” Instead of letting equipment languish, Arce and Eby put it to use, a move that helped maintain and build relationships with members.

3. Failure as Motivation

Failure may cause you to question your direction, knowledge, capabilities; you may wonder if you have what it takes to succeed as a small business owner.

These thoughts are natural. There’s no way to keep them from creeping into your mind. As frustrating as it may be, failure can be your greatest motivator. According to Harvard University researchers James Hayton and Gabriella Cacciotti, fear of failure can motivate greater striving for success.

Artist and sculptor Kelly O’Neill, owner of Fusion of Iron and Earth, shares that her dad, also an artist, found inspiration in failure. “What I always appreciated about my dad was sometimes the failures provided the best surprise and the most joy. A failure would lead to maybe a new series of art that he would do,” said O’Neill.

In her Back of the Napkin podcast “Friday Fails” episode, O’Neill tells how one of her dad’s pots blew up in the kiln because of a small bubble in the clay. What some would see as failure, sparked innovation for the artist. “He got the idea that, well, what if I started to blow up my pots before I put them in the kiln? He started doing greenware and when it was still kind of wet, he would drop firecrackers in them. Then they would blow out. He had a whole series of these pots that had these holes blown out of them. Sometimes failure can create a new idea.”

That’s what it means to use failure to motivate yourself.

4. Search for the Silver Lining

Many business owners define failure as doing something wrong or missing a goal. Instead, researchers Hayton and Cacciotti suggest small business owners take a “deliberately action-oriented approach” and face failure head-on. What can you learn from your failure? What good came from it? How can you use it as motivation? They note that learning is a powerful antidote.

While you may have to dig deep to find the silver lining in failure, it’s there. Don’t stop until you find it.

5. Use it to Plan Your Future

There’s more to learning from your failures than identifying what went wrong. You must also use your failures to plan.

When discussing payroll taxes, Cory Hershman, SurePayroll associate product manager says, “If you're going to pay somebody a thousand dollars in gross pay for the payroll, you can expect about an extra hundred bucks on top of that in employer taxes. That's something that we like to educate small business owners on because for budgeting purposes for payroll, it's super important.”

Think about that. You may fail to account for employer taxes with your company’s first hire, which could cost you money and cause various accounting headaches. But if you learn from the mistake, you can use it to plan your future. You now know what to do and what not to do with your next hire.

5. Use it to Plan Your Future

There’s more to learning from your failures than identifying what went wrong. You must also use your failures to plan.

When discussing payroll taxes, Cory Hershman, SurePayroll associate product manager says, “If you're going to pay somebody a thousand dollars in gross pay for the payroll, you can expect about an extra hundred bucks on top of that in employer taxes. That's something that we like to educate small business owners on because for budgeting purposes for payroll, it's super important.”

Think about that. You may fail to account for employer taxes with your company’s first hire, which could cost you money and cause various accounting headaches. But if you learn from the mistake, you can use it to plan your future. You now know what to do and what not to do with your next hire.

Final Thoughts

In many ways, the way you approach failure can make or break your small business. Rather than let a setback dictate your future, use the five tips above to learn and move on. Doing so will position you and your business for greater success down the road.

“Our research suggests that fear of failure is widespread and has both negative and positive effects on motivation, decision making and behavior,” said Hayton and Cacciotti. “So, while fear is a natural state for an entrepreneur, the ability to anticipate and manage it is a vital skill.”