Failure Is Good For You
This month, I made the tough decision to shut down the company that I’ve been building for nearly two years.
What a journey it was to get to this point. In my last post, I referenced the four phases of building a company. Since that time I’ve learned that phase four, previously titled “informed optimism,” has an alternate ending: “informed termination,” or more bluntly: failure.
Yes, that ominous, scary “F word” that we are hard-wired to avoid like the plague.
Over the last few weeks, I have completely reexamined my relationship with failure, and I’m proud to say that I have come to embrace indiFIT’s failure with unapologetic pride and a sense of peace.
Failure is definitely not one of the sexier parts of building a company, and I find that the personal aspects of a failure journey are not talked about nearly enough. My plan is for this to become a multi-part post that transparently shares my own experience with failure, including:
How I decided whether to quit, stick, or pivot.
The biggest lessons that I’ll take with me from my journey as a first-time founder.
So, let’s dive in. Grab your popcorn for a big, juicy failure story (don’t worry, it has a happy ending.)
I think of building a company like running a marathon.
It’s a long, taxing feat that few people attempt; and of those who attempt it, even fewer will win the race.
Even if you finish a marathon in literal last place, you still ran a marathon, an undeniably remarkable achievement.
You complete the marathon exhausted, but you come out of it stronger and with a sense of accomplishment; and you walk away knowing that if you do it again, you will run an even better race next time.
The critical point is that the race is still worth running even if you don’t win, because the outcomes of the race are separate from the personal gains that come from running it.
It’s easy to imply that building a company is the same thing - a remarkable achievement that leads to a smarter, stronger founder who will run a more effective race the next time. The problem is that when you are the founder running the race, it doesn’t feel like that in the moment (trust me.)
In the moment, it feels like you have the world on your shoulders and that failure is a worst case scenario that should be avoided at any cost. There are real employees who have chosen to build their career with you, real investors who have bet on your success, and real customers who, in the case of indiFIT, have trusted you with their business and livelihood.
That is a $hit-ton of pressure that has significant power to cloud judgement.
The difference between running a marathon and building a company is that nobody is betting time or money on whether you’ll win the marathon.
When your company isn’t healthy, there are three exhaustive options on how to move forward: quit, stick, or pivot.
The reality, however, is that the decision-making process around those three choices is inherently biased and emotionally charged because of the aforementioned pressures that come from other people counting on you.
Seth Godin’s The Dip is a phenomenal book that I will forever recommend to anyone navigating the quit, stick, or pivot decision.
The book defies the old adage that “winners never quit.” On the contrary, it states that “Winners quit fast, often, and without guilt” - that is until they find the thing that is worth sticking it out for. The key is to quit the right things at the right time.
To unpack the statement, you have to examine two things: (1) what are the right things to quit and (2) when is the right time to quit them?
#1 What are the right things to quit?
According to Seth Godin, knowing which things to quit starts with an important idea, which is that the goal of anything you do should be to become the best in the world at it. This applies to your company as well as you as an individual.
If your company is not going to be the best in the world at what it does and/or you are not the best person in the world to build the company that you are building; you might be focusing on something that is distracting you from the thing you actually can be the best in the world at.
Sure, this might be a little extreme, but the general premise is a really helpful framework for making a quit, stick, or pivot decision.
#2 When is the right time to quit?
A resource that helped me with this question was a workshop with JC Garrett, Kasey Jones, and Dan Manning (a dynamic trio building FounderUp, a community platform and training program that focuses on Founders instead of companies.)
In their workshop, they discussed the risks of quitting too early or too late:
Quitting too early can often be a product of impulsivity, ADHD, or simply exhaustion.
Quitting too late can often be a product of fear or bias - with bias stemming from optimism, sunk cost fallacy, or a desire for consistency.
The most impactful idea that came from that FounderUp workshop for me, however, was this one:
“You are a Founder whether or not you are tied to an active venture, and the job of a Founder is to maximize value creation over their lifetime.”
Sometimes the best way to do that, is to quit. It’s to embrace failure, and venture into the next chapter of the unknown.
As mentioned, that is where my own decision-making process led me.
In the earliest stages of that journey, it hurt like hell, but the moment that I “ripped the bandaid off,” amazing things happened. People applauded my courage and decisiveness, expressed excitement to see what we’ll do next, and made generous offers to support my team and I.
It was a huge reminder that the outcome of my business is separate and distinct from my personal outcomes. Sometimes, the two can be related, but just because a venture isn’t growing, doesn’t mean that the Founder has also stopped growing. In fact, I felt that the most difficult stages of the indiFIT journey were the ones that pushed me the hardest and facilitated the most personal growth.
So, here is how it all went down:
My own failure story began last fall. indiFIT’s new instructor growth had noticeably slowed down, the lifetime value of our customer was shrinking, and churn was increasing.
Quitting because of these early signs would have been premature. There were a few questions that we set out to explore:
Are these indiFIT problems or market problems? - there was a lot of capital flowing into our space around this time, including Talent Hack’s monster $17M Series A round, so it made it easy to think that we were alone in our issues. Our leading hypothesis was that some of our competitors were having more success partnering with the “best of the best” instructors. We suspected that our churn and LTV issues were rooted in instructor quality, so we optimized all of our KPIs around partner quality over quantity in order to validate or invalidate this.
What pivots can we make to the business in light of these issues? - in parallel, we began to explore ways to de-risk our business with potential pivots. One obvious risk was that the surge in “COVID entrepreneurship” in fitness was temporary, and that instructors would ultimately return to a typical studio employment model. If that became the case, a new market opportunity would be created - the opportunity to help studios empower and incentivize their increasingly savvy talent in a world where being independent is “the new normal.”
Our challenges continued into the new year, which caused our conviction in pivoting toward talent empowerment tools for studios to increase. To validate the strategy, we needed to answer these questions:
How big is the market for talent empowerment tools for studios? - we believed that brands who were known for influential talent would be an obvious beachhead for us, and from a GTM strategy perspective, we believed that chasing 2-10 location regional brands with short sales cycles would be a sweet spot. We were able to secure some amazing pilot partners, but in the process it also became clear that product-market fit with the majority of “SMB” independent studios was unlikely.
How much are studios and brands willing to pay for this offering? - our offering was effectively an “add-on” to core studio management softwares like Mindbody, Mariana Tek, etc. We found that most other “add-on” software was priced at ~$100 per location per month, AKA a $1,200 annual revenue opportunity per studio with a limited market size. It seemed that working with studios might be an interesting growth hack, but likely not a lucrative opportunity worth pivoting the entire business for.
Next, something unexpected happened. Our aforementioned competitor, Talent Hack, abruptly shut down just two months after closing their A round (life lesson learned: raising VC dollars is not the same thing as building a healthy business.) Their shutdown exposed data that largely confirmed our fears about the viability of our business - most notably excessive churn, having shrunk from thousands of active instructors to just north of 400.
In light of these updates, I asked myself four questions that would determine the fate of the company:
Do I still believe that this is a viable business knowing what I know now? - is there a path to product-market fit? is the market size sufficient? Do I have efficient ways to acquire my customer? Will my customer pay? Will my customer stick around? Are there signals of sustainable growth or is our business a hamster wheel? Is the market evolving in a direction that helps or hurts us? Are we differentiated in our space?
Is this the best thing for me to be spending my time on? - it’s important to acknowledge the opportunity cost of your time and energy. If a Founder’s job is to “maximize value creation over the course of their lifetime” - does pursuing this opportunity do that for me?
What is driving my decision? - is the decision data-supported and rational or is it stemming from exhaustion, impulse, or emotion? (It’s okay to take a beat and unplug in order to get the clarity you need on a major decision.)
Are we likely to succeed at fundraising in light of these market signals? - I put this last because I believe that “is this viable?” is a far more important question than “can I raise money for this?” You can raise money for a lot of ridiculous things right now; it doesn’t mean you should.
Based on my answers, we made the hard decision to shutdown. In reality, it’s easier to settle for mediocrity than it is to confront reality and quit. Failure is a hard option, but it is also a good option when you’re failing at the right things at the right time. I knew confidently that I was.
The good news is that failure is a lot sunnier once you’re on the other side of it. The hardest emotions that I experienced in this process came before making the decision; not after. When quitting is the right call, a sense of peace, relief, and support immediately follows the decision.
I’m so glad that I’ve been able to re-write the narrative around failure in my life. One of our wonderful investors shared a quote with me during our wind-down process that put it perfectly: “I’ve learned so much from failure that I want to fail every day.” This is a philosophy that I will carry with me going forward. Little of what makes life worth living happens when we’re playing it safe and optimizing for the comfort of a failure-less life. I would much rather get in the ring, take the punches, fall down a few times, and walk away knowing that I put myself out there and grew from the experience.
My company failed, but I didn’t. I couldn’t be more grateful for two years of learning, relationships built, and leveling up beyond my wildest imagination. I also couldn’t be more grateful for the community that supported us along the way. If you’re reading this, it’s likely that you were part of that community, so thank you. I’m looking forward to organizing and sharing our “lessons learned” and revealing our next big adventure soon!
More on this wild ride here in a podcast that I recorded with the lovely Mariana Malaguti of UNBOSSED.
