In the “Small Business” section of today’s New York Times is an article entitled, “7 Businesses That Did Not Survive” detailing the case histories of some small businesses that failed during 2009.
As a long-time consultant to business and now, a SCORE volunteer, I have seen plenty of small business failures. In retrospect, the owners of failed businesses can always come up with a list of reasons for their failure, but in the final analysis, it all boils down to the same thing. In the language of mountain climbing, they overextended their lead.
When you are climbing a mountain, you make some predictions about how things will go as you ascend and then commit to some level of acceptable risk. As you lead the way upward, you place some points of protection, called belay points, in the rock and clip in a climbing rope. While you are always looking to move upward, the prospect of unpredictable adversity guides your every action. As leader you are always asking, “What if”, and you make every effort to guard against future events that cannot be known with certainty.
As leader, if you take a fall it will be, roughly speaking, twice the distance from your last point of prediction. If your lead is overextended, your fall will be so violent that it will tear your protection point from the rock. Long falls usually result in serious injury or death.
In climbing and in business, the one thing we can be certain of is that things go up and things go down. The science and art of business involves learning how to ascend AND descend without getting killed.
“Go for it” is not enough. In my experience no one teaches small business entrepreneurs methods for predicting and managing risk. Come to think of it, the leaders of our biggest banks don’t get it either! They solve the problem by getting some other poor suckers to run the lead for them. It’s called BAILOUT.
