by Brian McKay
As an entrepreneur, you have almost certainly read the rather worrying statistics regarding the failure rate of small businesses. While some of the statistics are thought to be somewhat overblown or misinterpreted, the base facts remain the same: a small business has a 50/50 chance of surviving past its fifth year - which doesn’t sound particularly encouraging.
It can be tempting to try and push the possibility of failure to the back of your mind, wilfully ignoring it and instead focusing your energy on ensuring your business thrives. While there is something to be said for diverting your energy into helping your business to succeed, ignoring the possibility of failure can actually be damaging.
The power of the possibility of failure
It’s fair to assume that anyone who starts a small business believes they will defy the statistics and create a thriving commercial enterprise that can sustain its success long into the future. This means that most entrepreneurs tend to be optimistic people; they look at bad statistics and presume their business won’t fall victim to the same problems.
This positivity, however, can be negative. It can mean that an entrepreneur overlooks threats, misses red flags and loses the ability to act quickly and decisively to rectify problems - all because their positivity created a barrier between themselves and the genuine, realistic risk of failure.
There’s actually power to be found in the idea of failure. By acknowledging this is something you may experience, you are able to ensure that you keep your finger on the pulse at all times. Sometimes, you have to acknowledge the possibility of something going awry to prevent it from ever happening.
The importance of future thinking
Recognizing the possibility of failure helps to ensure that your business stays on track in the present, but it has an additional benefit, too: it allows you to plan for the future.
Essentially, what you need to do is ask yourself a number of questions:
What would you do if your business were to fail suddenly?
What would happen to your employees if the business failed?
How would your personal finances cope with the loss of income?
What would be involved in the process if you had to contact a commercial real estate attorney due to the threat of foreclosure?
How would your suppliers or B2B contacts be impacted by your business suddenly closing?
Would you know how to handle the process of obtaining liquidation experts, if this became necessary?
What would you do next, professionally speaking, if your existing business failed?
These questions can be alarming, but you need to ask them so you can then find the answers. By planning for a less-than-rosy future, you’re helping yourself out; if you do ever find yourself facing business closure, you’ll at least have a sound, balanced plan to fall back on to help you through the process. These plans would be helpful in the moment, but they’d also make the process as simple as possible, which in turn could ensure you can bounce back quickly even if your business fails.
Contemplating the possibility of business failure isn’t pessimistic; it’s sensible, genuinely beneficial to your company, and could allow you to make a positive fresh start in future if that became necessary.It’s therefore well worth taking the time to consider the ideas above, plan for the worst, and then hope for the best.