How all three companies I started failed for the same reason
…and the one simple step that could have saved the day
“There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again.” George W. Bush
If you talk to entrepreneurs they will often talk to you about the importance of failing fast.
If you think that you can reliably predict which ideas will work and which will tailspin into oblivion then you’re kidding yourself. Even the most obvious no-brainer concepts for business that simply “cannot fail to succeed” do not fly until they fly. You have to do your due diligence in advance, but then you’ve got to try them for real. That’s when you find out if they’re actually going to work or not — and if they’re not going to work, you need to spot that quickly and get the hell out o’ Dodge before they take you down with them, mentally, financially and reputationally.
Of course, you actually only get to make a decision on how quickly a business fails when it enjoys some degree of success. If it’s a total turkey you probably shouldn’t start it in the first place, and if you can’t spot that then maybe you oughtn’t to be getting into this in the first place…
Problem is, most ideas are not complete non-starters. Some total turkeys somehow succeed out of luck, innate talent or some weird unforeseen change in circumstances that should never have happened. Lots of them start and then stumble along, propped up by nothing but hard work, good intentions, money and the stubborn refusal of the owners to admit defeat. All of my businesses failed to fail gracefully.
In the early nineties, I was designing hardware and writing software for the security industry. A guy I met through work who had some spare money kicking around and wanted to get a whole lot more, came across some pyramid scheme involving domestic burglar alarms that used air-pressure sensing to detect when doors and windows were opened. There were actually a couple of these things on the market, but they were very crude, using little electret microphones as the sensing device and just an analogue comparator to detect when a step change in air pressure occurred over a specific amplitude. When I pulled these products to pieces and had a close look, they seemed like toys to me. I immediately knew I could make something a whole lot better.
In a couple of days I’d come up with a design and was ready to start putting a prototype together. Within weeks I had a working model, built around a cheap little microcontroller running an adaptive algorithm I’d written to continually monitor the pressure and look for the sort of pressure fluctuations that were characteristic of opening doors or windows, regardless of how big the step change was. It cut out the false negatives that happened when you were in a draughty house, and it managed the false positives that came from things like gas boilers firing up much better than the analogue boxes did.
I actually suspected (and still believe) that the best thing to do with the design would have been to miniaturise it and make it into an ancillary sensor to connect into existing intruder alarms, maybe with a carbon monoxide sensor built in, just to broaden the domestic appeal. In either case, it would have required customers who already had a burglar alarm in place, but it would also have sold for less. It would almost certainly not be a B2C style model of sales. You’d need it to be installed by your alarm company, and that meant that it couldn’t work in this pyramid reseller model that the people who were offering to finance the production of the unit were intent on following. They wanted a single standalone alarm device that could be sold for under two hundred pounds (which was pretty competitive compared to the cost of an intruder alarm install at the time), via mail-order.
Anyway, who was I to try tell these business people how to do what they did? I set to work on productionizing the thing, and with a relatively small investment and a lot of midnight soldering, I delivered twenty devices — packaged, boxed, branded and beautiful, ready to do a bit of test marketing.
Four utterly silent weeks after delivery, I learned that our sales and marketing guru had sold a couple of the pre-production models for cash to people he knew from the pub, had gone out on a booze-laden bender on the proceeds, beaten up his wife and been thrown in jail… The two other partners in the fledgling business fell out as a result, and refused to occupy the same room as one another. I was just the tech guy. My negotiation and business management capacities were utterly unformed at that point, and with the rapid passage of time and the inevitable demise of the pyramid model, my dreams of entrepreneurial stardom lay in tatters.
The technology was sound enough. If I’d gone with my original plan and made a pressure sensing peripheral to connect to other alarms, that could have been more successful — but that would definitely require a very different model and ultimately a mass produced end result to get the cost down to something practical. I could have stuck to my guns and trusted my gut feeling, but then the backers would not have been interested and we would have gone nowhere. I could maybe have picked myself up and dusted myself off, grabbed on to the steering wheel when the others chose to be at one another’s throats, but that would have needed a level of assertiveness and self confidence that I just didn’t have. The business didn’t fail early. It never really started.
Just before the turn of the twenty-first century, as we waited to see whether the world would be brought to an end by the cataclysmic consequences of the Millenium Bug, I was living in Ireland — still designing bits and pieces for the electronic security business, but now with my sights set a little higher. After an eye problem that had left me sitting in hospital for a pointless and inconclusive week of uncomfortable but boring tests, I came up with a design for a new product. It seemed like it might be a little expensive to make, but like all things in the world of manufacturing, it was all about the volume, so if I could just sell enough of them then that problem would easily resolve itself.
This time I was not going to toss the keys to the kingdom into the middle of the coffee table and see what showed up out of the swingers party of business partnerships. I would go it alone. No matter that I had never run a business before and had no money to capitalize this venture. No matter that the market for this sort of product didn’t really exist in Ireland — although it did (to some extent) in the UK. No matter that I would visibly shake with nerves if I was required to stand up and talk in front of anyone — even in front of my own family or friends. This was going to be me and just me, and I could make it happen.
In June of 2004 (so, about five years after setting out on this venture), I sat in my car at traffic lights in South County Dublin having just left the creditors meeting that wound up that company and burst into tears. I did that in the same way I’d done almost everything from the start to the end of that venture. On my own.
Once again, the technology upon which the business was based was sound. I actually had a range of products — something like four in production — all of which I designed, wrote the code, assembled — all of the things that I knew how to do and had been doing for years, along with a whole bunch of peripheral things that I resold from other OEMs. I also attempted to look after the accounts, I built the website, I did all of the sales and marketing, swept the floor, bought the coffee...
Throughout that period, I landed at my desk at about 07.30 each day and rarely turned out the lights to the office before 23.00. For a long (long) time there were no sales — you need to sell to get sales — but they did eventually come. Dribs and drabs, here and there; and each sale came from me, followed by me having somehow to deliver on what the client expected — whatever that might be.
You cannot run a business on your own. Not one that’s going to really be successful, and a business that costs more than it earns is not successful. Simple as that.
I learned so much in the time I built that business up and watched it fail. An unbelievable amount. To some extent, the lessons I learned in that phase were the most important ones I learned in the whole of my career, even though the purpose for me existing through that time failed and failed hard.
“Fail fast, fail often”
— James Surowiecki, The New Yorker
Remember that scene in The Magnificent Seven — the original — where Robert Vaughn fails to catch a single fly in his hand where he claims that once he could catch them all? That was me after the failure of that business, but instead of a Colt 45, my weapon of choice was the soldering iron.
Although there had been nothing fundamentally wrong with the products I designed and sold from my Irish business, my brain connected the failure of the business to my own personal failings. To me it had all gone wrong because of my own over-confidence in my own innate skills. The things that in many ways identified who and what I was in that period — an engineer, a coder, a maker — were what my brain decided to blame. You’re supposed to get back on your horse after you fall. I remained ground-bound…
I’ve never picked up a soldering iron or wrote a line of code since.
Move on to the Spring of 2018. I sat in the lobby of a hotel just outside Cambridge in the UK waiting to meet a career coach with whom to try work out whether I should apply for a job flipping burgers or collecting shopping trolleys.
My third business — one that had employed almost one hundred people, been based in Dubai and been recognized by some as a regional market leader — had finally been forced to shut its doors and lay off all staff after my business partners got on a plane and left the United Arab Emirates behind, taking what was left of the money we’d earned with them and leaving me with nothing but the job of being the last guy in the room...
In 2014 and again in 2016 I’d stared at the facts and realised that the right thing to do was to walk away from that business while I could, money in pocket, reputation intact (glowing, in fact). But I didn’t. Instead I waited until there was not enough money to pay the staff what they were owed, until we owed money to suppliers that we had no hope of paying and until all of our customers had realised that we were dead in the water. Not until my self esteem was shot so full of holes that I felt there was nothing left for me but flipping burgers or pushing shopping trolleys which is why I ended up handing even more money over to a career counsellor when I had no idea how to rebuild my career— a career counsellor who failed to do anything truly worthwhile for me, I have to add.
Real naivety was certainly the reason the first business failed, when I simply was too young and lacking in life experience to have been able to do anything other than be led by the nose into a situation that was farcical in the extreme. But those people I went into business with were clowns. I knew that.
My Irish business was a reactionary consequence of that. I knew I should not go into business with clowns, and so — still lacking any significant life experience — I removed all possibility of my business partners being clowns by having no business partners at all — even in a business that absolutely could not (and should not) be attempted in one-man-band mode.
I knew that. From the day I walked through the door of the five minute company formations office above a kebab shop in Dublin, and the day I told my wife of the time that I was giving up my day job to do it. I knew — inside — that it was going to fail.
The Dubai business would never have happened at all if I hadn’t just been in the wrong place at the right time. It was one of those rollercoaster things that you find yourself hurtling along on without a clue how you actually got there. This was by far the hardest of the three to fail at, even though when you looked at it on paper it had been failing all along.
So what’s the lesson?
You need people when you want to run a business. They don’t have to be friends, but it helps. They don’t have to be experts, but it helps. They do need to be honest, and so do you. You won’t fail fast if you’re not honest with yourself and accept that the thing needs to fail. You’ll cling on and you’ll deny the truth. You’ll expect the good times to be just around the corner even though they’re not.
Now — almost five years since that business finally closed — I still bear the scars. I’m coming to terms with it all, and chances are that I’ll never start another business. So this is not a ‘persevere until you finally discover the secret formula’ story. I’m not going to tell you how it should be done. You need to work that out for yourself. But if it’s something you feel that you want, take a step back for a minute and ask yourself if you trust everyone you’re going into business with. Everyone. The person in the mirror needs to be the one you trust the most, and he better not turn out to be lying.
Merton Barracks lives in Hong Kong after a life literally and metaphorically on the road.
He is a security technology expert, an autonomous vehicle expert, a counter-terrorism expert, a writer of fiction, a father, a ranter and an exposer of bullshit.
He is also a victim of childhood sexual abuse, who took half a century to face up to what that did to him and also what it made him. You don’t recover. You don’t repair.
You can find some of his work published on Illumination.
Take a look at some of his fiction
Or read about the process of coping
