On the Floor

What I've discovered about business is that it is always easy to find the reasons for failure once failure has been demonstrated. Unfortunately, by then it's too late.

Four months ago, an independent office supply shop opened up down the street. They offered the usual products and services you'd expect: office supplies, printing, ink cartridge refilling, and so on. They sunk a lot of money into computers, high-end printers, and a beautiful, expensively furnished board room available for rent.

The owners, who were awfully nice, came by our office to introduce themselves. I hoped they'd be another success story on Locke St., one of Hamilton's most flourishing commercial districts. And why not? They were providing valuable services and they'd put a lot of money into their business.

They cared about their business, and it showed.

Four months later they've shut down for good. Four months was all it took to wreck their dream.

I'm not privy to the decision they made to close their doors, but all signs point to the obvious conclusion that they simply weren't making enough money.

The problem is they opened on a street that is bustling, but it's bustling with retail stores, restaurants, and hair and beauty salons. There are only about three offices on the strip, including ours. Of these, all (I believe) have their own boardrooms, so there goes that expensive boardroom and all the space it takes up.

Perhaps they also assumed that they'd also get business from people in the neighbourhood who need ink jet refills and paper. They may have been right that this is needed, but it would seem that they were wrong about how much money it would bring in.

In other words, it's kind of obvious why their business failed.

Or is it?

What I've discovered about business is that it is always easy to find the reasons for failure once failure has been demonstrated.

Unfortunately, by then it's too late. Dreams have been dashed and money has been lost.

I chose this business as an example because it's a simple business and because its failure is recent. However, the phenomenon of easy-to-find reasons for failure once failure has occurred is very common, including (and perhaps especially) among web startups.

In fact, it's so common that I think it's important to start facing up to unpleasant truths before resources are committed.

I propose a simple method for doing this: imagine failure.

Imagining Failure

Start by picking a sensible time in the future. A good time might be the date at which your startup capital runs out if your new business is not replenishing it.

Now, imagine locking up the doors of your office and heading home with the painful knowledge that this was your last day working on what you loved. Now you've got to sort out the bills, let your investors know its over, and if you've got a family, let them know too.

Your business has failed.

Why?

If you can't answer this question yourself - if you simply can't think of any compelling reason why your business idea is not 100% guaranteed to succeed - you're probably too emotionally invested in your business idea to make rational judgments about it, and you need to find somebody else to talk to.

If you can, find a stranger who is knowledgeable about your industry who is willing to give you a little of their time. Set up the business failure scenario, and ask them to analyze it with you.

You're far more likely, I think, to get an honest opinion about your business idea if you let somebody view it as a failure, for several reasons.

First, they will feel less of the social pressure to validate your idea based on how you feel about it. In other words, if it's just plain stupid, hopefully they'll tell you.

I sometimes wonder how much money has been lost because people didn't want to hurt someone else's feelings.

Second, most people are hesitant to make predictions about the future. We've all seen some crazy ideas succeed, so people are often willing to give ideas the benefit of the doubt before they're put into practice. That doubt disappears after a proven failure, which is what you're asking them to imagine.

Third, it changes the tone of the discussion by inhibiting your ability to defend your idea. You can no longer rely on the assumption that your idea is a guaranteed success, because it's actually an abject failure. Once the invincible armour of your brilliant idea has been removed, you and your advisor are free to consider the external forces that will affect the future of your business.

Lastly, this discussion should also help you prepare for what you will do if it turns out that this is more than just a thought experiment and your business really does fail. You should know when to cut your losses and have a plan in place to deal with failure if it occurs.

Rethink

By this point, you should have a list of reasons for failure (if you don't, someone is either being incompetent or dishonest, because there is no business idea that is immune to risk).

It's now up to you to go over these reasons in the most rational, objective way you can. You should be asking yourself two important questions.

First, is your business idea viable at all? Perhaps the list of reasons for failure is so long, or so compelling, that you would really be better off spending your time on something else.

Second, assuming that your business idea is still viable, what changes can you make to address the points of failure you have identified? How do you mitigate these risks?

The great thing is that at this point you haven't spent a penny. You're free to rethink your idea, plan your defenses against risk and conduct more market research. In many ways you are now much more likely to succeed.