Business Plans The Beginning And End For Most Businesses
Does your business plan include a section on planning for
failure? If not, why not?
Most businesses fail. And in many cases businesses fail
unexpectedly leaving the business owner stunned and at loss
about what to do. In other cases, business owners continually
feed cash and everything that they have into a failing business,
getting in so deep that when they finally give up they have
taken a big loss. And then they are stunned by what they have to
do to unwind the legal parts of their business.
And then if the business grows, often the business owner is not
sure what to do with the growling monster that wants constant
attention.
A business plan should include exit strategies.
The first business plan exit strategy should postulate what you
are going to do if the darned thing actually succeeds and you
are trapped with having to work seven days a week to keep up
with the demand. And your business plan exit strategy should
give you a list of target buyers for your business so that you
can sell it at a profit, unless, of course, you want to run it
from your home computer for the rest of your life until you
decide to shut it down and throw away all the good will and
equity that you have built.
At the same time your business plan should fully analyze what
will happen to you when your business fails. Remember that you
have at least, if not more than, a 90 percent chance of failing.
You have to plan to fail.
And your business plan has to define failure. Failure may simply
mean that your work effort has not met your goals. You may be
making a profit, but your time and effort is not worth much more
than the money you are earning from the project. Define the
benchmark and live with it. Make the decision before you start
up.
Also define how much money you will be able to invest. Use that
sum in your financial projections. If you do not have enough to
make the business self sustaining, using worst case assumptions,
stop. Look at a different business model and run another plan.
Too many people do their financial projections based on their
passionate belief that they can sell a product. And to satisfy
their own preconceived notions they make their financial
projections based on best case assumptions. They never assume
that the economy may sour and consumer purchasing power will
decline. They never assume that the exchange rate for the dollar
may affect the price of products that they want to import. So
when it happens, the financial projections upon which their
business plans are based are simply wrong.
To protect yourself, make your financial projections more
realistic. In all subject your business plan to a reality check.
Discuss it with one or more people and listen to their ideas.
Let them give you their opinions and criticism. And then
consider factoring them into your plan.
If you don't have a business plan, it is the end for you now. Of
course it is not to late to step back and write a plan, but if
you have no plan and you are running a business, you are beyond
the beginning of the end. The end is likely nigh.
So whether you read this before you start of before it is too
late, write out your exit strategy now and then fill in the
numbers in your financial plan. Your numbers will tell you which
exit strategy is the most likely one that you will use. If the
numbers tell you that you will fail, listen to them. If they
tell you that you will succeed, go for it.
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