12/09/2014 04:37 pm ET Updated Dec 06, 2017

How to Fail Your Way to Startup Success

Failure. You've likely read articles on how to avoid it or turn it around, but rarely how to deal with it openly and transparently. Yet, failure is a business reality. Every entrepreneur - and every successful company - has undoubtedly experienced more than a few gut-wrenching moments of demoralization and market loss, before forging ahead and rising to the next level.

In truth, the fear of failure keeps brilliant business initiatives from happening. It's too bad. Risk taking and big thinking have always coincided with the potential for failure - countered by the possibility of great reward. For a business or entrepreneur, failure gives us the opportunity to pause, rethink, revise and learn the value of persistence.

As a co-founder of a lean startup, I know this grueling "how to fail" process all too well. Five years ago, you may have been tempted to join our critics - forecasting a slow and painful demise. We've certainly had our share of hard days and lean times.

Most company success stories seem to start with the initial light-bulb moment, then skip to their success, completely glossing over the failures that built the backbone of their business. Exhilarating, but far from reality. That being said, here are the top three market failures my company encountered - and how each one helped shape who we are today.


Failure #1: Take Unsuccessful Advice

TSheets, an online time tracking app, sprang from a side project when I owned a printer cartridge business with 30 employees and several locations. After finding one of my nicest, most honest employees fudging a few minutes on her time card, I realized I was losing money (if she was doing it, all my employees were)! Thinking it would be an easy problem to solve (this was 2005), I quickly found my ideal solution of an inexpensive, online and multi-location solution didn't exist. So I hired a software programmer and friend to build a custom app. The end product (a very basic rendition of what we have today) caused our bookkeeper to enthusiastically suggest, "you should sell it!"

So we did. I funded the company myself initially, then in 2008 raised a very modest amount of capital. Our future, we thought, was riding on a big "launch" into the marketplace. Our strategy was based on advice from an outside marketing contractor to make time tracking viral and sexy. That is, IF we had the "right" message and made it dirt-cheap. I relied solely on the advice of a third party who had no vested interested in our success.

We "launched" according to his advice and the strategy failed. It would be our first of three go-to-market failures.

Lesson learned: Looking back, I took advice from someone who had no roster of real client success. Now, I never take advice from somebody unless they've had proven success in the specific area I need, and our interests of success are aligned. Taken another step further, I now have mentors for every area of my life: from leadership to relationships, finances, family, and business.

Failure #2: Hire a Sales Force

Our second market strategy was in my sweet spot. I was sure it would succeed. With a background in cold-blooded B2B sales, I knew I could sell my way out of any pickle. I hired a stable full of thoroughbred sales people, gave them calling lists, training, and a quota. I anticipated the sales would roll in. Nothing happened to any significance and our second strategy failed miserably. We had run out of money for payroll, were forced to scale down to only essential staff, and moved into a free space.

Those were some low times, but we still hadn't hit rock bottom. We eventually received some publicity and in the comment section of the online publication, got hammered with slams like: "That company will never be a success." "If he [the CEO] believes mobile time tracking will work, he is a joke."

That was our final blow. My co-founder and I walked out of our borrowed office space, lay down on the grass, and literally stared up at the sky, trying to figure out the basics. Asking questions like: "Who are we?" "What the hell do we even do?" "Does our product provide any value to the world?" We were out of money and running on a skeleton staff - with almost no growth in three years. It was getting tough to be optimistic.

We agreed to sleep on it and meet early the next morning to decide our fate. We both still believed.

Lesson learned: Every person on our staff has to be a believer. Believe in our company, our core values, and in the value that our product brings to others. They also need to believe in the possibility of themselves. This results in a dynamic and inspiring place to work, even when the chips seem to be stacked against us.

Failure #3: Underbid Your Efforts

Our third market failure is actually something that helped us survive initially. We offered custom development and paid-for implementations to any company that wanted us. If a customer asked for a feature, we would build it for a nominal fee. We underbid the development but it created enough cash to survive a few more months.

While it helped us keep the lights on, we knew this strategy was neither sustainable nor scalable. We couldn't customize our product for every customer. However, it turned out that these customizations, requested (and partially designed) by customers would soon turn into differentiating features that have helped TSheets stay leagues apart from the competition.

Lesson learned: While undervaluing our product wasn't sustainable, we were able to use that period of time to "crack the code" on our business. We learned that very rarely do startups go as planned. By staying optimistic and being willing to pivot, we stayed alive. The quote, "Remember that guy who gave up? Neither does anyone else" couldn't be more true.

As we've failed our way to success at TSheets, now growing at 150% year over year and in 45 countries, there's a quote by Calvin Coolidge, that I read repeatedly not only to myself, but our staff as well:

"Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'press on' has solved and will always solve the problems of the human race."

I've realized there's always going to be someone. There's always going to be someone with a better location, better funding, a higher IQ, entrepreneurial pedigree, or better education. The deck is most likely stacked against you. It's up to you to decide what YOU are going to do. Then, come hell or high water, do it.

Building a startup can be difficult, often punctuated with painful failures. Through our failures, we discovered they were part of the process needed for success. We restored our belief in our vision and ourselves, and we decided to persist. While difficult, it's also the exciting part - it's where the possibilities lie. So press on.