What they don't deal with in your business plan

Looking back at the mistakes made leading up to business failure is something which is done on a regular basis, in many cases with the help of seasoned professionals. It can obviously be a useful learning exercise. However, wouldn't you think that with the wealth of experience which has built up around this, business start-up advisors in banks and other business support organisations would by now have started going a little deeper into exit strategy implications?

Looking back on my experience, my business plan got more than a small thumbs up from many experts for its comprehensive content - marketing, staffing, profit & loss, cash-flow etc. Mistakes in all these areas contributed, to a greater or lesser extent, to the business failing. Even my exit strategy of "selling" the business once it had achieved its 5-10 year growth projections was seen positively - and there in lies the problem. No-one really pushed me on the negative exit strategy which I am living through now.

Don't get me wrong - like many entrepreneurs, rightly or wrongly, I may or may not have been so blinkered in my determination to get the business going, that I would have been blase about such failure. However, I believe that if the frightening consequences of failure had been presented in a constructive realistic manner, the very real pressures of debt and re-inventing my life would have made me think a few more times than I actually did - I am (was?) a optimistic realist at heart and I'm more than capable of assessing risk etc.

So, what don't they deal with in your business plan? They do not address your true capability and resources to deal with absolute meltdown, financially and mentally. It's impossible to see all the reasons why a business may or may not fail (recessions, for example, come and go with random unpredictability) but I now believe that it is possible to address the consequences of failure and to present a few nightmare scenarios when assessing the business plan.

And why don't they do this? Well, let's take an example from my personal case: a lease company requesting a personal guarantee which I was unable to provide meant me going to a family member. It took a few phone calls and email exchanges to finally get them to admit that in the worse case scenario, house repossession would be an option and I was able to make a judgement on that (a very mistaken judgement in hindsight). They were unwilling to present the worse case scenario up front because they just wanted to push for the leasing arrangements to be taken. That family member is having to deal with the ugly consequences of my erroneous decision - happily, for the moment, without house repossession.

So what don't "they" deal with in your business plan? They don't really deal with effect of failure - and this failure should not be restricted to the business - they should deal with the effect on the physical and mental well-being of real people. Some people are more capable than others of dealing with bankruptcy, insolvency, mental pressures etc. In my case, it has completely flipped my personality - taking the 80/20 rule, I was previously 80% optimistic, 20% realistic compared to currently 80% pessimistic, 20% pessimistic! All individual circumstances are unique but I believe there are certain factors which can't be ignored when assessing a business-person's capability to recover and go forward.

These factors include and are not limited to

• age
• financial resources
• career and experience
• support network

So, with just under a couple of years of business experience, I am able to say that, irrespective of the business case, my personal situation and lack of resources should have sounded some alarm bells. I may be fooling myself but I believe that with a little realistic insight based around factors such as those above put up against worst case failure scenarios examined by experienced professionals, my business venture would have been based on stronger foundations, if indeed, I would have allowed myself to have built it at all.

(Originally posted 04/10/2009)