Planning for Surprises in Your Business
When starting a business, you have to prepare for future problems. Daniel Nathanson, Ph.D. from UCLA Anderson Graduate School of Business, provides examples of actions you could take that can help you prepare for future surprises.
You can't possibly plan for all unknown surprises, but you can do things to eliminate some surprises and to be in a position to react to surprises when they do occur. The best way to reduce surprises and be in a position to react to change is to know your business inside out. Many entrepreneurs encounter unknown surprises because they don't have enough experience in a particular business or industry or they may not have enough experience as an entrepreneur or business owner. Here are some solutions: if you are not already a knowledgeable expert in your business and industry become one. So, you may need to get a job in the industry before you start a business in that field. You should also get out in the field and talk to everyone you can about the industry. Go to trade shows, understand the structure of the industry, learn who the key players are, and the challenges people face. Understand the best practices currently in place for doing business. In other words, do your primary research by talking to everyone you can, then find and attract a mentor or an advisor and expert in your business, perhaps with a few gray hairs, as quickly as possible and try to build a team with some smart knowledgeable people who are experienced in their own functions and in your industry. Once you know the business and have experts on your team you will be amazed how that reduces the amount of unknown surprises you will have. Number two, no matter what surprises will happen; have alternatives. First of all, make sure you have enough capital available so that you are not living on the edge and if you go over a slight road bump you are not ending up in a ditch. Things always take longer and cost more than you think they will. Also, try to make a list of the major assumptions, especially those go/no-go assumptions and assumptions that have a high impact on your business. Try to identify what you will do if your assumptions prove wrong and anticipate how you will react and then react quickly. That is what entrepreneurship is all about. People don't plan for contingencies. What if this happens? What if that happens? Take a sheet of paper, say to yourself, “Here are my goals, here are my milestones. What happens if I don't reach that goal when I think I will? What happens if it costs more? What happens if we have to make changes in the product?” This will happen, so be prepared. As Eric Ries says in The Lean Startup, “Build, test, and measure, and then iterate.” In this way, you're actually planning for those “surprises”.