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When Your Business Fails: What the Research Actually Shows
If you closed something you built and it keeps catching up with you at odd hours, researchers have a word for what may be going on: grief. Work on business failure argues that losing a business can be grieved like other losses, and that the grief can get in the way of learning from what happened. A small study of eight founders' stories found that the ones who made sense of their failure managed their feelings and turned their attention back to the failure itself. We could not find a study that tested journaling or voice recording after a business fails, so this page sticks to what the research does show.
On this page
Why it can feel like grief
In a 2003 paper in the Academy of Management Review, Dean Shepherd drew on psychological research on grief to look at what business failure does to the people who run the business. He argued that losing a business through failure can cause the self-employed to feel grief, a negative emotional response, and that this grief interferes with their ability to learn from what happened. That paper is a theoretical argument, not an experiment. Its value here is the framing: the heaviness after a business ends is a recognised response to a loss, not a sign that you are handling it badly.
Not everyone reacts the same way
A 2014 study in the Journal of Business Venturing, by Anna Jenkins, Johan Wiklund and Ethel Brundin, built a database of entrepreneurs who had recently filed for bankruptcy. It used appraisal theory, which looks at how people judge a stressful event, and tested whether failures judged more as harm or loss went with greater grief. Its headline result was variety: the authors found great variation in how entrepreneurs responded to their firm failing. There is no single correct way to feel after a business ends.
How founders made sense of it
A 2015 study in Entrepreneurship Theory and Practice, by Orla Byrne and Dean Shepherd, compared eight founders' narratives of their failed businesses, looking at the emotions they described at the time of the failure and at the time they told the story. Strong negative emotions motivated founders to try to make sense of the loss, and strong positive emotions gave them the mental resources to do it. Emotion-focused coping helped them manage the negative emotions. And sensemaking was helped by strategies that pointed their attention at the failure itself and encouraged self-reflection.
What this does not show
These are small or theoretical studies. The 2003 paper is an argument rather than data, and the 2015 study is eight cases. We read all three through their indexed summaries, not the full papers, so we have left out sample sizes and effect sizes we could not see. None of them tested journaling or voice recording. The closest evidence we found is a 1994 experiment in which recently unemployed professionals who wrote about their thoughts and feelings on losing their job found new work sooner than those who did not. That is a different loss, and it tested writing, not speaking.
What that means if you want to try it
The founders who made sense of their failure did two things the research names: they dealt with the feelings rather than burying them, and they turned back to what actually happened, including their own part in it. The point of the second step is understanding, not blame. Phi's 60-second voice entries are one place to tell that story out loud while it is still fresh. That is a format, not a tested treatment: none of the studies above tested voice journaling.
Sources
Shepherd, D. A. (2003). Learning from business failure: Propositions of grief recovery for the self-employed. Academy of Management Review, 28(2), 318–328.Jenkins, A. S., Wiklund, J., & Brundin, E. (2014). Individual responses to firm failure: Appraisals, grief, and the influence of prior failure experience. Journal of Business Venturing, 29(1), 17–33.Byrne, O., & Shepherd, D. A. (2015). Different strokes for different folks: Entrepreneurial narratives of emotion, cognition, and making sense of business failure. Entrepreneurship Theory and Practice, 39(2), 375–405.Spera, S. P., Buhrfeind, E. D., & Pennebaker, J. W. (1994). Expressive writing and coping with job loss. Academy of Management Journal, 37(3), 722–733.Say it out loud instead.
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