Lessons of Success — and Failure – For entrepreneurs, there’s something to be learned from every company that made it big — as well as from every company that crashed and burned.

What makes for a small-business success? Clearly, plenty of people think they know.

Typing in the keywords "small business" and "success" on Google last week yielded nearly three million hits. Doing the same on Amazon’s book site drew more than 375 results — including "Success for Dummies," "How to Make Millions With Your Ideas: An Entrepreneur’s Guide" and "Drive a Modest Car & 16 Other Keys to Small Business Success."

By GWENDOLYN BOUNDS
Staff Reporter of THE WALL STREET JOURNAL

http://www.wsj.com

If only it were so simple.

Last year, the U.S. gave birth to over half a million new firms. Equally telling, nearly the same number of firms closed their doors in the same period. What this means is that however much we glorify and obsess over success in the workplace, the notion of failure must go hand in hand with it. And in each of these triumphs and tragedies are lessons that would benefit the next person to reach for the brass ring.

What’s Success?

One of the crucial lessons is also one of the least obvious: "Success" in the small-business world isn’t always defined by the obvious standards — such as making the most money, getting big fast or even staying in the same type of business. There are more-subtle payoffs, including lifestyle choices and the karmic satisfaction of pursuing a dream — even if it ultimately doesn’t pan out. Interestingly, more than a quarter of small-business owners surveyed believed they were "successful" when they closed, according to a Small Business Administration Office of Advocacy report released last year.

On a practical level, the reasons some businesses stay open and others don’t can vary dramatically. But one study from the SBA suggests some common troubles, at least among those who file for bankruptcy. Highest on their list of woes: outside business conditions, such as higher rent or insurance premiums, new competition or declining real-estate values. Among other factors cited were problems with the Internal Revenue Service, loss of financing, creditor disputes, and personal troubles of the owner, such as illness or divorce.

While these are problems that can plague any size firm, "for small businesses, there is simply less margin for error," says Dave Anderson, a leadership consultant in Agoura Hills, Calif., and recent author of "Up Your Business."

Offense as Well as Defense

Meantime, doing things right — as opposed to just avoiding pitfalls — is equally critical to real success. From his vantage point, Mr. Anderson believes the enterprises that become great — not just good — are the ones that "keep the hunger and stay in attack mode even when they succeed," which, as he points out, "is against human nature." The leaders who prevail over the long haul, he says, don’t become "immersed in paperwork" but rather stay in the trenches and keep innovating.

"You can’t build a great company by memo or voice mail," Mr. Anderson says.

Patience, too, it seems, can separate winners and losers.

About two-thirds of new employer firms survive at least two years, according to the SBA, but only about half make it to four years. The fortitude it takes to keep plugging along in the early, lean years runs deep in survivors, says Doug Hall, host of Brain Brew Radio, a show about American entrepreneurs on Public Radio International. He believes that standing one’s ground, even if failure seems imminent, can be the deciding factor in a business owner’s ultimate success.

Overcoming Naysayers

"The challenge with entrepreneurs is that they don’t stick with it," Mr. Hall says. "It takes too much energy because the naysayers are whispering, ‘It doesn’t work, it doesn’t work.’"

However, at the end of the day, he suggests, the most important distinction between those who fail and succeed lies in the DNA of the original brainstorm. "To borrow a phrase: It’s the idea, stupid," Mr. Hall says. "Did you have an idea that’s meaningfully unique?" He believes the most thriving entrepreneurs are the so-called American dreamers — the ones who see a void in American commerce and try to address it rather than haphazardly chasing any inspiration. For instance, the guy who can’t find a printer cartridge on a weekend and is moved to open an office-supply store; or the entrepreneur who goes to a dirty theme park and decides he can do better. That, Mr. Hall suggests, is where the Staples and Disneys of the world originate.

"Money isn’t the ultimate measure of their success" in the beginning, he says. "It’s the fulfillment of their goal."

Ms. Bounds, The Wall Street Journal’s small-business news editor in New York, served as contributing editor for this report.

Write to Gwendolyn Bounds at [email protected]

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