The idea of starting a new business is exciting. However, the possibility of failure is always there. When failure does happen, learning from it and finding a way to turn it into a positive can determine the success of the new venture.
Management consultant Kara Penn argues that entrepreneurs can find greater, faster success if they simply embrace failure as a teacher rather than as an obstacle to overcome. In their book, "Fail Better: Design Smart Mistakes and Succeed Sooner" (HBR Press, 2014), Penn and her co-author, Anjali Sastry, actually encourage entrepreneurs to craft failures that can help them drive progress, professional development and innovation.
Anthony Scaramucci, founder of SkyBridge Capital and author of "Hopping over the Rabbit Hole: How Entrepreneurs Turn Failure into Success" (Wiley, 2016), agreed, noting that there is indeed a "right" way to fail.
"Being an entrepreneur is all about taking risks, but you shouldn't take careless and thoughtless risks. Don't quit your job and start a business if you're not prepared," he said.
Even if the risks you take are calculated, failures can still happen. Most of your ability to bounce back from a failure comes from how you deal with it. Penn reminded leaders not to react poorly to their failures or those of their teams, and to always remain confident in their organization's ability to bounce back.
"Leaders are in a difficult position because they have to both project confidence and be approachable," added Scaramucci. "As a leader, if you are forthright about your own shortcomings and the challenges facing your business, your team will trust you and work for more than just a paycheck."
In their book, Penn and Sastry outline a three-step method to help entrepreneurs and business leaders harness the benefits of failure and use their mistakes to put their companies on the path to success.
Launch your project. Most projects can be designed with a better launch in mind. The goal of the launch phase is to help teams weed out failure modes early on. During launch, Penn said that teams need to hone in on the right problem to solve, link the actions they propose to take to the outcomes they desire, account for available resources and shore up any gaps.
Build and refine. To get important data in ways that allow you to shift directions as needed, focus on information-rich activities early on in the project so that you can test critical assumptions before it's too late, Penn said. By doing this, you can improve upon a particular approach or idea throughout the course of the project. This approach also enables a learning environment in which creative ideas can be explored with a safety net in place, and that safety net comes from intention, planning, collecting and using data, and managing time frames.
Identify and apply what you've learned. Your efforts from steps one and two can do more than just generate a better outcome for your business. Those steps also teach you how to do things better the next time around.
If you do find yourself dealing with failure, bouncing back isn't impossible. Scaramucci advised keeping everything in perspective.
"When you lose a job or have a business setback, in the moment it seems like the biggest crisis in the world," he said. "Anxiety leads to panic, which leads to paralysis. In order to get yourself moving again, you have to deal with the underlying anxiety."
Finally, Scaramucci stresses the importance of surrounding yourself with positive people such as mentors, employees and friends. Look to create partnerships with them, he said, because having a partner decreases your odds of initial failure and increases your ability to pivot from setbacks.
Additional reporting by Nicole Taylor. Some source interviews were conducted for a previous version of this article.