“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.