Fail Fast - Please!
Last month, I wrote:
That was a bit dark, and we do like to take a positive attitude here. But if you are going to run a business you have to face the reality of failures, and if you are going to start, run, take over, or otherwise deal with a small or startup business, you are going to have to deal with the possibility all the time.
Before I go further
The way I fail fast starts with my minimal business planning tool. It's a short document that asks a few questions. I find that if I am unable to answer these questions, I had better rethink it, and if you cannot answer them, you should not be starting that business yet. Surprisingly (or maybe not), most of the folks who I find trying to start businesses lack clarity around these basics. The videos section of this Web site cover this in more detail, but at its very core, it's this:
To be clear, if I cannot answer these questions, I will go no further until I can. And neither should you! You may not know all the details, but you had better have a darned good approximation.
The Stress Test
The first thing we try to do with advisory clients is "internal diligence". It usually starts with a meeting of 6-8 hours, in person is preferred, but online can also work. In these hours, we go over the business as if we were doing an external "due diligence" effort, but where we find problems, instead of simply writing them down, we identify that we need to address them. Sometimes we start to do so with some ideas during the meeting, and in other cases we leave it for later.
As it turns out, even though we don't intend it this way, this turns out to be a sort of stress test. If the entrepreneur is stressed by this or keeps saying this doesn't apply to them, or doesn't know how to do these things required to answer the questions, or thinks they are too good to have to answer these questions, or is a pain in the butt and refuses to deal with or move forward on this, it is a darned good sign that they will fail before long. But in truth, it takes a few months of interaction to make such a determination.
After a few months of part time investment it becomes far more clear that some companies will fail. But there is another important thing to understand about the result.
Some companies will fail slowly! There seems to be no way out of it. They will linger, slowly decay, keep having good potentials not realized, face competition from unexpected quarters, get frustrated workers, run out of funds, and the list goes on and on.
On the other hand...
My experience with business failures, after the fail fast phase, is that slow failure is worse than fast failure, but sometimes you should just take your time. Some businesses can be operated very inexpensively when they are not generating a lot of business, staying in stasis for a time before turning into successes. I will give two examples:
I had a business scanning for security vulnerabilities over the Internet before the market was properly formed. I decided to pull the plug way too early, even though it was not particularly difficult or expensive to continue to operate it at slightly less than break even. Six months after I more or less gave it up, another company started a service business and went public within a year for a billion dollar valuation. I may have given up too soon.
I have a business today that was in stasis for a few years. Everything was in place for success, but getting the market to work with it was problematic. We had channel partners signed up but they were not selling very much. I expect to make $300K this year from it and $1M or more in 2018. It's starting to get popular. The key is that the cost of stasis was very low, which allowed by to have it sit with minimal operational costs and remain relevant for long enough for the market(ing) to catch up.
Try to differentiate failures from successes as fast as you can. If it is going to fail, don't waste my time or yours. But if there is hope, take a bit of time and effort to work it out. Every success could have been a failure, and I have given up too fast.
Copyright(c) Fred Cohen, 2017 - All Rights Reserved