Another wise observation from PC

[wynn]

PetesWeekly.com
Business Owner Tactics.
June 5, 2014.
Unexpected Outcomes?
Here's the thing: We often use the wrong words to talk about business.

For instance, we use the word "failure" to denote the closure of a firm. That word conjures up a huge host of emotions that get in the way of our understanding what really is happening. (To say nothing of messing with our psyches.)

A much better phrase would be "unexpected outcome", in the sense that none of us expect it to happen.

This occurred to me as I read The Tibetan Book of Living and Dying. Since 100% of us will die at some point, the author Sogyal Rinpoche is surprised at how few of us prepare our souls for this passage.

A penny dropped. The stats on closure confirm that about 96% of businesses will close within a decade of starting. That seems awfully close to death and taxes in my mind.

Just as death is not an unexpected outcome, nor should business closure be.

What if we built our businesses from day one as if they were not immortal? What if we did not borrow against our homes, eating capital that we have been saving our entire lifetimes? What if we started as if were going to close soon, despite what the American gurus say about thinking positively?

How might we do things differently if closure were not unexpected, but the norm? (Which, in fact, it is.)

As I see it, 96% of us would be better off. That seems like a much better result than we, en masse, are currently getting.

On the face of it this sounds awfully depressing, doesn't it?

I see it as empowering. Any single closure is one more step on the path to getting it right. And just as our school term tests prepare us for the year-end exams, maybe we should be a tad more sanguine about these intermediate results?



Warm regards

Peter Carruthers

[desA]

So, should the SA economy expect a tsunami of "unexpected outcomes" over the next few years?

Words can be ever so comforting - yet tell absolute lies.

[Dave A]

Reduce the pain and you'll also reduce the inclination to avoid the pain.

Few things get me more motivated than staring potential failure square in the face and saying with venom - Failure is not an option!

[adrianh]

I must admit that what he says does make sense. If one starts the buniness with the mindset that it may hit the wall then you may be inclided to set it up in such a way that you are insulated incase it does fail. What he is saying is that when you are gambling and there is a fair chance that you may lose, you shouldn't bet everything you own. You bet as much as you can afford to lose.

I suppose it is simply putting 'Calculating and minimizing risk' into a small business framework.

[Dave A]

Oh - On the "contain your risk" aspect of his strategy, I have no problem.

I'm just far more comfortable when Pete focuses on a "recognise there is a (high, in this instance) possibility of failure" angle rather than trying to psychologically diminish the significance of failure.

I'm also far from convinced failure should be renamed as an "unexpected outcome". "Not hoped for", perhaps. But moving it all the way to "unexpected" is, to my mind, a dangerous step too far. One really does need to seriously consider the possibility...

A subtlety, perhaps. But I think an important one.

[Marq]

I agree with you Dave.

Failure is always a thought and a considered possible outcome with a new business.
So to call it unexpected is just not an option.

This is just playing with words and of course selling his business.
I also do not buy into this scenario that we have to always fail to get ahead, which is what I am reading in this article.
To start a business with a view that we have a 96% probability of failing, but thats all right - we can can bounce up again even stronger is not empowering.

Its something that we have in the back of our minds and will fight it all the way but its not all right cause its now expected.

Is the souls death the same as a business failure?
Whats the percentage of how many have got up all empowered after the fall and started again?
And where does this 96% failure number come from anyway?

[adrianh]

I also don't like the word 'failure' Our words determine the way we perceive things, feel about things and thus react to them. The idea of 'pass' vs 'fail' is deeply embedded in us from childhood. You can tell a child that they failed an exam or that they know 40% of the work. The one statement starts off positively and the other negatively. By the same token, my daughters take part in competiitive sport and it simple fact that they are novices who will take a very long time to reach the podium. We teach them that they have to work hard and strive for the best but that said, that they should not feel like failures if they don't get on to the podium for 5 years straight. The same can be said for business. It is a given that 96% of businesses do not work out. Given that fact there is very big chance that the same will happen to yours. Businesses go belly-up for many reasons and often those reasons are simply out of our control, Sony developed wonderful little mini disc players but did not see mp3 players coming, the cafe owner next to the mine in Rustenberg didn't see the strikes coming and went belly-up because trade suddenly dried up.

I do not for one moment believe that he says that your business WILL fail and therefore you should be half-hearted about it, I think that he is saying, in analogy, you are taking part in the Comrades marathon and that rather than bet your house that you will come first and then end up losing your house and feeling horrible about it all when you come 8,321th, you should go with the point of departure that you will probably not come first, therefore you shouldn't go all in and you should not feel terible if it doesn't work out. That you should be in a position to recover quickly and to try again and work to come 8,000th...

Our notions of of common sense are terribly warped, we have all sorts of different rules for what is considered to be passing and failing. We have rule for particiption in sport, rules for writing exams, rules for interacting with other people, rules for busines etc. Fundamentally we make these rules up as we go along.

The bottom line rule is this; you do you level best and if it doesn't work out, you dust yourelf off and try again. The rider is that you have to accept up front things are not going to work out more often than they will. Even the best figure skaters fall a very large percentage of the time, it is not a matter of success vs failure, it is a matter of practice makes perfect even if you have to get up and try again after breaking a leg.

[Marq]

The bottom line rule is this; you do you level best and if it doesn't work out, you dust yourelf off and try again. The rider is that you have to accept up front things are not going to work out more often than they will. Even the best figure skaters fall a very large percentage of the time, it is not a matter of success vs failure, it is a matter of practice makes perfect even if you have to get up and try again after breaking a leg.

Thats quite correct.
There is however a big difference between the small gains and losses made within your overall success Vs the do or die scenario thats always painted by these experts on business. Bottom line of their message is always that they can save you from yourself.

At the end of the day we create our own reality.

[adrianh]

Common sense works like this; the guy who won says 'bet the farm' and the guy who lost says 'don't bet the farm'. The prudent thing to do is to err on the side of caution and to rather gain small than lose big.

[Greig Whitton]

Four thoughts:

1. "Success" or "failure" is determined entirely by our intended outcomes. Business closure is not, inherently, failure. In the right circumstances, a voluntary closure can be considered a success.

2. Like Marq, I would love to know where PC gets his 96% statistic from.

3. Assuming 96% of businesses do close within a decade, surely it is hypocritical to label closure an "unexpected" outcome?

4. Ownership outcomes trump business outcomes, and a business does not have to be indefinitely sustainable to satisfy the needs of its owner(s). If your business satisfied all of your needs within a decade, why mourn its subsequent closure?

[Justloadit]

I have had 3 occasions in the last 4 months in which I have been knocked back financially, totaling a huge sum of money due to an employees negligence, most of my profit for the next 2 years.
So be careful in saying that it won't happen to me, the situation may change because of something not on your radar.

Like driving on the road, most accidents are caused by the actions of others, which affects you directly.

[adrianh]

It comes down to the absurd way we see success and failure. Why do we buy insurance? We do because we foresee the likelihood of something terrible happening....yet we are made to believe that we should blindly forge ahead in our businesses as if we are superheroes who will succeed!

[Pap_sak]

My business is closing down after 7.5 years and I certainly do not look at it as a failure. I had a good run, made some money but some chain stores moved and I found I could not compete with them. Things happen, I am just happy I had a few good years and am pulling out more than I put in.

I should though have started pulling cash out a long time ago, instead of "reinvesting" all profits - my one huge mistake.

People are finding it odd that I have a closing sign on the door but a big grin on my face!

[desA]

Well done in closing with a grin on your face. Getting out more than you put in means you were a roaring success.

All the very best in your next venture.

[wynn]

IMHO the idea of 'unexpected outcomes' covers the subject pretty well!

100% of small startups do not intend to fail from the get go but the sad truth is that 96% of them do and we need to look at the reasons because that is where you will find the 'unexpected outcomes'

Joe Bloggs opens a hamburger stand in a Shopping Mall where there is no other food sold and no space for another food shop, three months later Wimpy gets the mall owners to add an extension where they can trade, an 'unexpected outcome' so so long Joe!

But I believe the 'unexpected outcome' of most small businesses, even when you take the necessary precautions, is slowed down cash flow which starves you of the ability to expand and even chokes your ability to service existing orders, then when the bank refuses or recalls your facility that is what can be referred to as an 'unexpected outcome', you thought you had a relationship with your bank, then your Creditors suspend your account because you are having difficulty getting paid so can't pay them and to make matters worse your clients are giving orders you should be getting to other suppliers simply because they are able to supply at the time.

I don't think anybody in their right mind opens a business with the intention of failing but if you bear in mind that you have a 96% chance of hitting the wall, if or when it happens you are not surprised, afterwards you are in a better frame of mind and probably in a better position financially to start up again, after all it only takes 25 failures to ensure that you reach the magical 4% who succeed, although I believe it is a lot quicker because of all the startups who bet the farm never venture again.