Exit Planning: Planning for failure can never come too soon

I work, and have worked, a lot with entrepreneurs and entrepreneurial "want-a-bes" in the earliest stages of their enterprise formation. After listening to the things which fire their passion -- the germ of their idea, their pride of inventiveness, and their dream of wealth - they will ask for my help to find money for the project. Before I even consider the project, I ask them one key question, "And what is your plan B?" This determines whether this is a real prospect or a Dreamer. My exist plan for Dreamers is -- "Conclude the interview", "Move on" "But do it politely."


Dreamers use up your time and they don't pay for any advise you give them.


The recent catastrophe in the Gulf of Mexico with British Petroleum (BP)'s Deep Water Horizon explosion and the oil well rupture has capture the national and international news. The crisis is now two months old with no immediate end in sight. This disaster brings home the cost of not having a Plan B.


Now you might ask, "What does BP, a multi-billion dollar international corporation, have to do with me and my small business? The answer is Everything.


Every oil well drilled is an entrepreneurial venture risking $100s of million dollars. BP has the experience and resources for opening new wells. One would think that they would have a plan B in case of failure or accident. But in their narrow, "get it done quickly and cheaply" mind set they have put not only the project at risk, but the company,and all the contingent stakeholders as well. These include those who depend upon the company for their livelihood, the investors, especially pension programs, their neighbors including the fishing and tourism businesses and the tax payers of the states and the nation whose oil they had been given a lease to exploit.


My clients, and prospective clients, don't have the resources of a BP. They don't necessarily have the experience or access to the expertise in their business that BP has. But going into a new business venture carriers the same risks of failure. And while the size their potential losses may be no where as large in absolute terms, they are proportionately infinitely larger for these entrepreneurs than they are to BP.


The lesson here is that BP did not have a Plan B for the Deep Water Horizon well venture. This is proving to be very costly for the company and all its stakeholders. Because there is no Plan B, it could even mean the end of the company as we know it today.


As sole proprietor of your business, you have placed everything you have at risk of success and at risk for failure. If you opt for some protection you might wrap yourself in a corporate form such as a LLC, Limited Liability Corporation, but even that will not totally protect you from the risks of failure.


So how do you protect yourself or at least minimize the risk of failure?


You do so by planning FOR FAILURE. I strongly recommend that you consult the following book if you doubt me - The Ten Commandments for Business Failure by Donald R. Keough.


Oh, I know, this is not the "positive thinking" that new age career/business coaches and gurus preach in their books and seminars. They teach you to think positively, develop a positive attitude, and practice "the Secret". They preach and practice the "build it and they will come" philosophy. But just as a candy bar in the late afternoon can give you a temporary sugar high, these doses of magical thinking don't stay with you very long, become habit forming and lead to a fat, obese ego at the risk of "personality diabetes".


Planning to fail is not negative thinking. Planning to fail is rational, realistic thinking. Planning to fail is like walking into the crowded theater, looking for the exits, and making note of the best route to take out of the building in case of fire. With such a plan, the show can be much more enjoyable. While you don't expect to use the plan, in the rare event that there is a fire, you know what you have to do to survive. Many others without such a plan will more than likely panic and their survival becomes problematic.


Planning for failure can also be planning for success.


At the end of the show, your escape plan can now be your exit plan. That is, you know where the exits are, you see the crowd moving toward the front exit and becoming stuck as they slowly make their way through restricting doorways. You, on the other hand, walk in the opposite direction, go out a side door, and get into your car thus beating the traffic. You succeeded in enjoying the performance and you saved yourself time and effort in the process by having an exit strategy or plan.


Planning for failure can help you to reduce your loses and planning for success can help you to maximize your profits. Planning for both contingencies is called EXIT PLANNING.


When is the best time to build your Plan B? At the same time you are building your Plan A. Too many people build their houses with all the doors opening into the house. If you look around, you will see that most businesses, because of fire codes, have their doors open out. That is their basic Plan B in case of emergency.

The big question today for everyone involved in the Gulf Deep Water Horizon venture is: "How do I get out of this catastrophe alive?" As we see from the news reports, nobody apparently planned for failure. Today they are simply trying to survive and if they do survive,for years to come they will be paying the price for their failure to plan for failure.

Do you have a Plan B? What is your exit plan for failure? What about for success?

Here at B. R. Bainton Associates, we are prepared to help you evaluate your risks and coach you in developing you own exit plan. If you have questions or comments please contact us at brbainton@gmail.com

What are you doing to Prepare for H1N1?

We are in the beginning days of the H1N1 flu pandemic. This fall and winter, the traditional time for flu, America and the northern hemisphere can expect a massive increase in the number of flu cases, normal and H1N1. This will impact the economies of many nations as workers and consumers become infected; as the hospitals take on a heavier loads; and as those who remain productive attempt to fill in for those who have to stay home from work because of illness, their own or a family member.

For small businesses, especially those dependent on cash flow to survive, this epidemic may be a killer. The normal period of infection is not known but according to the Center for Disease Control

In general, persons with novel influenza A (H1N1) virus infection should be considered potentially infectious from one day before to 7 days following illness onset. Children, especially younger children, might be infectious for up to 10 days.

For further information about H1N1 check out this link to the CDC: Interim Guidance for Clinicians on Identifying and Caring for Patients with Swine-origin Influenza A (H1N1) Virus Infection available at CDC H1N1

As a small business person/owner you need to prepare.

What you do to protect yourself, and employees will not prevent your business from being at risk.

This information may help you deal with the disease and get you, your workers and families immunized, but what about the economic consequences to your business? How did you prepare for Y2K or post 9/11? Are you going to do the same thing?


What did you do for Y2K?

In 1999 I was trained as a Y2K consultant to work with small and midsized business to plan for what was feared to be a potential disaster as the Y2K (millennial) bug hit the nations computer systems. For small business, this could have been real disaster. The purpose of the Y2K consultants was to 1. Help business owner determine if their systems were susceptible to the Y2K problem; 2. If so, to help them prepare a plan for their business if they, their customers, or suppliers would be affected.
It turned out that there was a simple solution for most Small and Med size businesses.

The price of computers and advance in software created an opportunity and reason to buy new software and new equipment. So very few took advantage of the opportunity to do a top to bottom analysis of their business.

What did you about 9/11?

In the Spring of 2003, I went to a training session sponsored by the new Department of Home Land Security. Again the purpose was to train and prepare consultants to help businesses, small, medium and large to prepare for the post 9/11 threat. What Do you know what the threats are to your business? How do you protect against them? What is your plan to survive a repeat 9/11 type event? Again, few small businesses took advantage of the opportunity to plan for the threat. Instead they adopted the herd survival strategy, "don't attract attention to yourself."

What are you doing to prepare for the pandemic?

A pandemic is not a technological problem, nor a security or political problem. H1N1 is an equal opportunity disease. It is a PUBLIC HEALTH PROBLEM and a species wide biological disease problem.

Have you thought about the risks? Have you planned for the risks?

Here are some of the risks:

1. Key employees come down with the flu and are out of work for 2 weeks. Do you have a plan in place to cover their job responsibilities?

2. 20% or more of your work force is out of work with the flu for a month or longer. Can you still run an effective operation? If not, what is your plan to insure vital operations are not interrupted?

3. 20% or more of your suppliers are unable to fulfill their orders to you and your operations are effected because you don't have the inventory to maintain your minimum operations for more than a month. Do you have sufficient inventory? Do you have the ability to shift suppliers to insure no disruption in your operation? Do you have business disruption insurance and are you covered?

4. 20% or more of your customers are unable or unwilling to make purchases or pay their bills for a month or longer because of the impact of the pandemic on their business or jobs. Do you have enough cash or credit available to cover your operations for an extended period of diminished revenue and negative cash flow?


What are you doing to prepare your business for it and for the collateral damage of the epidemic on your suppliers/customers and community?