In 2010, my business partner and I were running a successful iPhone screen cover distributor business when we decided to add a new product line– digital memory devices. Retail and sales relationships we’d established made it a significant opportunity for us. We were eager to demonstrate we could deliver on more than one product.
After months of hustling day and night, establishing the brand and working ourselves into the supply chain, we got our first really big purchase order. We spent several more weeks on fulfillment, again working day and night. We finally shipped.
Two days later, we got an email from our head quality control person — one of the toughest emails I’ve ever received. He informed us that the digital storage devices we had just shipped weren’t what our customer ordered. A dishonest supplier found a way to work around our QA process and rendered our shipment worthless.
We had no choice but to recall.
Business deals gone bad
As you can imagine, there was a whole lot of mess to clean up — financially, legally, with our suppliers, and with our customers. Because of the magnitude of that shipment, that business failed completely. I felt like a complete failure.
In the months that followed, there was also a lot of introspection. I started to think about specific steps we could’ve taken to prevent what amounted a defrauding of our company and our customer. That bad deal changed how I do business in big ways.
1. Research potential business partners
I now make time for complete and thorough research into potential business partners. We didn’t do enough due diligence on our digital media device supplier. Because we had been successful with our other supply chain, in retrospect, we were overconfident in our own ability to “sniff out” bad actors.
2. Build efficient, scalable processes
Now I take the time to build rigorous business processes designed to be scalable and sustainable. We let sales considerations dictate the timeline of events instead of making sure we were building a complete end-to-end decision tree. When you’re pressed for time, it’s tempting to gloss over the details in hopes that everything will work out for the best.
3. Prepare for the worst case scenario
In the midst of the stress and excitement, we never stopped to ask ourselves, “What’s the worst case scenario here?” I needed to do a better job of identifying preventable “never events,” or potentially harmful events and then manage the risk.
If I could do it all over again today, we might have lost that first big client, but we had others in the pipeline that would have materialized. We took a big swing on an opportunity that we didn’t fully understand. Ultimately, we struck out so bad we got ejected from the game.
Failed? Bounce back
Failing isn’t just an abstract possibility—it can really happen, and it’s painful. Running a successful company was a lot of work with no guarantees of success. I wondered, and with good reason, if I was I really cut out to run my own business. Did I really want to open myself up to failing that hard again?
In the end, I decided I wasn’t going to let this first failure define me. I was only a “loser” if I didn’t get up and try again. I gave myself permission to fail again — as long as I didn’t repeat the same mistakes and learned everything I could from what went wrong.
Failure will become a part of your story — often in positive ways. For me, that particular story made it into my Harvard Business School application, where I eventually went on to earn my MBA.
Harvard, in turn, led to opportunities working with some of the world’s best companies and illustrated an opportunity cost that made it much easier for me to raise money for my fintech startup, ZipBooks. I built the first version on my own, and continue to program daily, thanks to the skills I acquired post-failure.
I don’t love failure, and I do everything I can to avoid it. But I’ve learned to accept it and profit from it. Without getting a close-up view of failure, I’m not sure I would have gotten so far, so fast.
This article has been edited.
Tim Chaves is the founder & CEO at ZipBooks, a free accounting tool with built-in invoice financing, time tracking & payment processing. A version of this article originally appeared on The Next Web. Connect with @timchaves on Twitter.
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