business plan

“Fail fast and be flexible” was the topic of a keynote address at a recent Association of Small Business Development Centers annual conference. Few messages are more pertinent to many companies in today’s business climate. We need to find out as quickly as possible what won’t work. Even in starting a business, leading experts, are encouraging entrepreneurs to develop low-cost versions of a product, show them to potential customers get their feedback, improve the product, test it again and then again, until determining a product that is ready to market. This is before developing a business plan. The key to this process is adaptability and flexibility.

So it is with an existing business when the owner finds it struggling after calamitous difficulties. The goal is to recognize problems quickly and no quality is more important than resilience. Resilience amounts to the flexibility to come up from the mat by adapting to changed business conditions despite enormous stress, pressures, threats, and the urge to feel despondent.

Duffy Electric Boat Company provides an example for changing one’s business model. After finding its sales of new boats plunged to almost half their pre-recession level, Duffy quickly turned instead to renting and refurbishing older boats for resale.

Reorganization under Chapter 11 of the Bankruptcy Code enables businesses to fail fast and repay creditors. Research shows that entrepreneurs who handle liabilities, whether Chapter 11 is used or not, have a better chance to successfully recover, whether they stay in the same business or start another. As we know, Chapter 11 is used by large corporations, such airlines like United, Dow Corning, US Steel, as well as smaller businesses. But Chapter 11 can also help smaller companies streamline their organization or gain time to sell their assets.

Turning to others outside a company for feedback at the first signs of trouble can also make a big difference. Many companies have had success interviewing customers to learn what they like and don’t like about their company and competitors and adjusting their business accordingly. Professionals, such as consultants and psychologists can also provide outside perspectives that enable us to recognize our mistakes early and suggest alternatives.

If you find your business under stress, remember thousands of others have bounced back. That’s the American experience. So face facts quickly and move on.

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Adapted from our March 2012 Costco column.

How many times have you heard a lecturer say that the place to begin a business is with a business plan? What comes to our minds when we hear or read this is a picture of a think formal document. How necessary is this. Some recent research casts doubt.

Peter Economy, who co-authored Lessons From The Edge: Success Secrets for Starting and Growing a Business asked 75 successful entrepreneurs that started out with home based businesses about their business plans. Almost every one said that in hindsight they would not have created a business plan. They indicated that it’s better to dive right in than to plan out every little thing, and said that the only time they needed a formal business plan was when they needed to get outside financing.

David E. Gumpert, author of How to Really Create a Successful Business Plan, and Burn Your Business Plan! concluded from his survey of 42 private investors that half of them had invested in companies without seeing a business plan. Almost 2/3 of them said that an overall evaluation of the business was more critical than a business plan. It seems that business plans are a remnant of the pre-Internet era, ensconced in business school programs and countless textbooks.

Despite these findings business plans are valuable as a means for doing the work that needs to be done if you are a novice to business. Many free tools are available for creating business plans, such as are available on sites like Women’s Economic Ventures , http://www.bplans.com/, http://www.abcbizloans.com and Enloop.com. Learning all you can about a business and your market however, is always a critical exercise. You should be able to answer the following questions before you start any business:

What exactly is the nature of your business? For example, are you selling gourmet chocolates? Are you renting construction equipment? And so on.
Who is going to buy your product or service?
Why should people buy what you are selling?
How is your product or service different than what is already in the marketplace? How will you reach your target customer group?
What tasks do you need to do first to get started? Can you organize your tasks in order of priority, first, second, third, and so on. How will you set the price you will charge?
What will your costs revenue be?

Putting your answers to these questions in writing is helpful, but it doesn’t have to be a complicated 50-page business plan. As we say in our eBook Why Aren’t You Your Own Boss?, the key is to always move forward toward your goal, and to refuse to allow obstacles (like being paralyzed by a formal business plan) get in the way. Every day define at least one goal to accomplish tomorrow, write it in a notebook, and then when you get it done, cross it off your list.

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Comments and questions on the substance of this blogs are welcome. If you have other questions about this website, please contact me directly for a consulting appointment.

Fail Fast and Be Flexible

Do You Need a Business Plan for a Sustainable Home Business?