Failing to succeed: How business flops become the ultimate masterclass

Hiten Keshave’s first business failed while he was studying towards an MBA at Rhodes Business School. “It took everything with it,” says Keshave, now founder and CEO of Unconventional Capital & Advisory (UCA). He left East London for Joburg with an empty bank account, the clothes he was wearing and a backpack. A friend offered him a place to sleep.

Keshave had launched his renewable energy business immediately after completing his articles as a CA. “The timing felt right,” he says. “Renewables were gaining traction in South Africa in about 2012, I had the technical financial training and I had grown up inside my father’s business, so I believed I understood what running a company involved. Reality showed me otherwise.”

His technical competence was fine. “I could read a balance sheet, model a project and understand the numbers better than most.” What he could not do was sell or network effectively. “I did not have the people skills to build the kind of relationships that actually move a deal forward. None of that is taught at university or at school, yet it is fundamental to whether a business grows or stalls.”

His father’s business dealt with consumers; selling to the corporate world was completely different. Keshave encountered “longer cycles, multiple decision-makers, procurement processes and relationship-building over months rather than moments. I walked into that game with the wrong playbook and no-one to tell me.”

He adds: “The business failed because I had the technical skills and none of the commercial ones. In a small business, those soft skills are the growth engine.”

The financial loss was only part of the pain. “When you build something and watch it fail, you carry a quieter voice for a while that questions whether you should try again,” he says. “The thing nobody prepares you for is that as a founder, the business failing does not feel like a business event. It feels personal.”

Looking back, Keshave says the warning signs had been there. He was focused on growth and his studies rather than the foundations of the business. The failure was not, as entrepreneurial lore might frame it, a clever learning opportunity. Keshave describes it as a genuine loss of what he had built.

The moral of the story comes in what happened afterwards. The MBA he was completing did not save the business. It did, however, give him an understanding of what had gone wrong. “Every framework I was learning became a live diagnostic on my own failure,” says Keshave. Painful as this was, it was the “most effective education” he could have had.

Though failure may be an effective teacher, simply experiencing it does not make anyone a better entrepreneur. Keshave did eventually start again, but not by immediately launching another company. He joined someone else’s start-up on a salary well below what he could have earned as a chartered accountant, a decision he now describes as an investment in learning how businesses are actually built rather than how they look in financial statements.

What became clearer with distance was that much of the structural fragility underneath his first business had been avoidable. This experience eventually became part of the rationale for building UCA around helping smaller businesses identify weaknesses earlier.

“This is survivable. I am on the other side of it,” he says. “The business I run now exists specifically because of what that failure taught me.”

Failure does not do the work

“Failure teaches nothing by itself,” says Henley Business School Africa dean Jon Foster-Pedley. “I’ve watched entrepreneurs fail three times and learn the same lesson three times, which is to [say] they learnt nothing.” Those who improve are those willing to examine which decisions were theirs, which assumptions were wrong and what they would change.

Wits Business School entrepreneurship lead Boris Urban similarly suggests that learning from failure can break old patterns of thinking and help founders develop new capabilities, but only when lessons are absorbed and applied. “Good entrepreneurs do not repeat the same failures, though they may make new failures.”

Failure, it seems, can be both constructive and destructive. As Morris Mthombeni, dean of the University of Pretoria’s Gordon Institute of Business Science, puts it: “In addition to the psychological and social trauma, the emotional and financial trauma may have a negative impact on the absorptive capacity of lessons … ultimately affecting engagement with the entrepreneurial process.”

The critical distinction is between entrepreneurs who are reflective and those who aren’t. Useful learning comes from interrogating assumptions, listening to stakeholders and changing course where needed, says Boston City Campus’s Cobus Oosthuizen. “Failure can be an expensive teacher, but it is not necessarily a good teacher.”

Regenesys rector Sibongiseni Kumalo is equally sceptical about treating failure as inherently valuable. “There is nothing romantic about losing money or watching a business close,” he says. Certainly, failure can produce perspective — greater attention to cash flow, assumptions and early warning signs — but its value lies in what the entrepreneur does afterwards.

When founders stop listening

Caroline van der Merwe did not lose Jem, the human resources-based tech business she co-founded. Her lesson was subtler: for too long, the founders were unwilling to let go of what they thought the business should be. Today, Jem is a human resources-based technology business using WhatsApp to deliver HR and employee benefit services to deskless workers.

“We spent years married to our initial ideas for our business and [were] reluctant to change our minds and really hear what our customers wanted from us,” she says. But while they were still in the start-up’s early stages, before it was too late, they changed direction.

Van der Merwe says self-trust is one of the things an entrepreneur has to build most aggressively. At the beginning, when founders are persuading employees to join and investors to part with money, self-belief is what keeps the venture moving. Later, however, advice arrives from everywhere. The founder has to decide when conviction is useful and when it is simply preventing the business from hearing what the market is saying.

Richfield distance learning MD Sholina Durga sees the same mistakes pop up repeatedly. These include premature product launches, poor cash flow management and scaling before the necessary systems and governance are in place. “[Entrepreneurs often] attempt to do everything alone, rather than building strong teams and partnerships,” says Durga.

Another problem is getting too attached to the solution itself. Entrepreneurship adviser Alvira Fisher often sees the same problem. “Developing a solution without first confirming that it addresses a real and meaningful customer pain point,” she says.

Founders can become attached to an idea before testing whether people genuinely need it and are prepared to pay for it. Fisher’s preferred route is to start with the customer’s problem and work backwards to determine how skills, experience and resources can solve it.

“Entrepreneurs must be willing to speak to customers, communicate the value of an idea, listen to feedback, build relationships and encourage other people to believe in what they are creating,” she says.

Founders can become emotionally attached to their ideas — “much like parents regard their own children as exceptional — which can make it difficult to assess those ideas objectively or respond constructively to criticism”, says Hennie Pelser, MBA lecturer at Emeris Postgraduate and Research Centre.

That attachment, he says, may lead entrepreneurs to take risks without conducting sufficient due diligence, or to overlook evidence that challenges the original idea. The danger is that conviction can blur into stubbornness.

No room for error

None of those mistakes happens in a vacuum, says Rhodes Business School director Owen Skae. South African founders are trying to make decisions in an environment that Global Entrepreneurship Monitor (GEM) experts continue to rate poorly for government support, regulation, finance and other conditions.

South Africa ranked 47th of 53 countries for entrepreneurial effectiveness. The problem, says the GEM report, is not that our entrepreneurs lack ambition, creativity or resilience, but because “the environment in which they attempt to build businesses systematically works against them”. Red tape and unequal support mechanisms make it hard to succeed.

The report states: “The South African entrepreneurial ecosystem [offers] real strengths: a sophisticated financial sector, a growing incubator network, established universities and a large, young, motivated workforce. But strengths that are unevenly distributed, poorly co-ordinated or inaccessible to the majority of entrepreneurs are not ecosystem assets; they are features available to a minority.”

These constraints are not intractable. They merely require the political will to implement administrative reform. Were this to happen, “these interventions can move the dial within a single budget cycle”. South Africa’s sad entrepreneurial record “is the accumulated result of poor policy choices that can be rethought”, says the report. “South Africa consistently underperforms not because its citizens lack entrepreneurial ambition but rather that the enabling infrastructure to convert ambitions into outcomes is weak."

The report compares South Africa’s entrepreneurial scorecard unfavourably with that of India, which shares many of the same social and economic challenges. It says: “The [performance differential] is not explained by income levels or market size. It reflects deliberate policy choices: investment in digital infrastructure, streamlined registration, active government programmes, and a cultural environment that celebrates entrepreneurial success. These are not conditions that arise automatically with development: they are built.”

Skae says one of the most consequential mistakes local entrepreneurs make is operating a “business as usual” model that ignores South Africa’s systemic realities.

“We frequently see founders focus entirely on immediate short-term outputs, such as rapid sales or product iterations, while completely ignoring the broader societal and environmental outcomes of their business.” This leaves them exposed to infrastructure and logistics failures, as well as internal red flags such as cash deficits and overtrading.

To be successful, entrepreneurs need to treat environmental constraints “as primary variables in their business model design”.

CG Tech co-founder and CEO Jason English says infrastructure constraints, crime, scarce capital, skills shortages and slow-paying customers place real pressure on businesses. Yet firms in the same industries, facing much the same environment, can still produce very different outcomes. “The difference is often leadership and culture.”

He cautions against treating every policy-related constraint the same. While uncertainty and administrative complexity can deter investment, he says some entrepreneurs wrongly view transformation and broad-based BEE purely as obstacles.

In his own businesses, genuine black ownership and partnerships have brought new networks and perspectives, and created value. But entrepreneurs should distinguish between legitimate criticism of policy and resistance to transformation itself. “Building a more inclusive economy is not only a social requirement; it can also be good business.”

What the MBA can, and can’t, do

“An MBA cannot remove the cruelty or uncertainty of business, but it can improve the quality of the entrepreneur’s decisions,” says Oosthuizen.

More than anything, he argues, an MBA should sharpen judgment. Frameworks will not hand founders the right answer, but they can help them ask better questions before committing scarce time and money. “In entrepreneurship, avoiding one major error can justify the entire educational investment.”

Van der Merwe found some of the most useful points of preparation at the University of Cape Town’s Graduate School of Business (GSB) outside the usual technical disciplines. She points to its emphasis on personal motivations, psychology and self-management, including a leadership course that required students to interrogate their own motivations and behaviour.

“There was a sense that developing the person was as important as developing the skills,” she says. Looking back, she regards that introspection as one of the most valuable parts of the MBA.

The GSB’s Mikael Samuelsson says the school aims to prepare students for entrepreneurship by combining state-of-the-art research with real practical experience. Students aren’t just learning theory but also working through the same challenges they’ll face as founders. Entrepreneurship and innovation modules place students in real-life situations and equip them with the tools to find, assess and launch sustainable ventures.

He says: “Where I think the greatest value lies is in how this sits alongside the rest of the MBA. Building a venture is only half the challenge. Leading and managing it once it exists is what determines long-term success. The broader programme gives students that management capability, so aspiring entrepreneurs leave not only knowing how to launch a business, but how to run one that lasts.”

For English, the Milpark MBA challenged the assumption that because an approach had worked before, it would do so again. Being placed among people from different industries and backgrounds showed him that the same problem could have several defensible answers.

“The MBA does not necessarily give you the answer to every problem,” he says. “It helps you recognise that there may be more than one valid answer — and that your first answer may not always be the best one.”

While the classroom gives entrepreneurs a strong foundation and a language for understanding business, “experience adds the human reality”, says Fisher. A framework can help an entrepreneur assess risk but cannot fully recreate the pressure of managing scarce cash, making decisions with incomplete information or being responsible for employees and customers.

The gap between understanding a problem and actually living through it is one business schools can narrow, but never close entirely.

Foster-Pedley, a former airline pilot, uses an aviation analogy. Pilots do not learn to deal with an engine failure by crashing aircraft; they train in simulators where the pressure is meaningful but the consequences are recoverable. Business schools, he argues, need the equivalent: “environments where students make decisions under genuine uncertainty, get some of them wrong and live to apply what they learnt.”

Kumalo makes the same distinction: experience, in his view, develops judgment. A classroom can teach strategy, finance, leadership and risk, but entrepreneurship requires decisions when information is incomplete and the consequences are real. Experience teaches founders when to persevere, when to change course and which opportunities to walk away from.

“Business education can prepare you for those moments, but some lessons become real only when your own business, people and reputation are on the line,” he says.

Durga, for her part, argues for entrepreneurship education that is more “technology driven, practice orientated and locally relevant”. That includes simulations, live industry projects and entrepreneurship challenges, but also putting students in front of actual business problems and asking them to test ideas in real markets.

She says AI, automation and digital transformation should be embedded across the curriculum, alongside more practical preparation for the financial realities entrepreneurs face. “Students should be equipped with an understanding of platform economics, digital business models and data-driven decision-making.”

There’s also a view that entrepreneurship education is becoming more experiential, with generative AI incorporated into coursework and real-time business simulations. “Entrepreneurs need capabilities to operate in contexts characterised by ambiguity, disruption and rapid technological change,” Urban says.

School’s out

Looking back at his own entrepreneurship education, Keshave thinks business schools need to prepare more directly for the conditions most South African businesses face in reality. That means less emphasis on the venture-backed “scale-fast” model and more on bootstrapping, scarce capital, price-sensitive customers and unreliable infrastructure. Governance, Keshave says, should also be taught from the start as a foundation for growth rather than a compliance exercise.

Just as importantly, schools need to deal more directly with what happens when things go wrong. “Failure currently appears in the curriculum as a cautionary case study about a company that no longer exists. That is not useful,” says Keshave.

He would rather see students taught how to have the difficult conversation with a bank, restructure a struggling business, manage employees through uncertainty and, if necessary, close it down properly. These were lessons he had to learn while his own business was failing.

“Teach failure as a subject,” he says, “not as an anecdote.”