Several times in my investing life, as the final board member making the arrangements to![\"\"](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2021\/12\/Will-the-Last-One-to-Leave-Please-Turn-Out-the-Lights-300x237-1.png\")
dispose of remaining assets, I have literally been the one to turn out the lights, carry out the documents, books and records to my car, and become the only remaining contact between the failed business and the investors, bankruptcy court, or creditors. \u00a0I volunteered to do this several times when there was no-one else, even the founders, to do this. \u00a0And these were emotional experiences to say the least.<\/p>\n
We ask ourselves \u201cwhat if?\u201d <\/strong><\/p>\n In aviation circles, we read in our pilot magazines about \u201cNever again!\u201d or \u201cI learned about flying from that.\u201d\u00a0 Pilot-authors tell their stories in the first person, and all of us readers slow down to think while reading of these events, wondering \u201cwhat if\u201d or whether this could happen to me.\u00a0 And if it did, would I have reacted differently?\u00a0 Most importantly, we think: \u2018Now that I know this, would I behave differently if it did happen to me?\u2019<\/p>\n How about the entrepreneur -founder?<\/strong><\/p>\n Professional investors rarely attach a red letter upon a failed entrepreneur. \u00a0In fact, if that person can tell their story and relate the lessons learned clearly, there is a positive response many of us will make to the next pitch from that person.<\/p>\n Investor pattern match<\/strong><\/p>\n [Email readers, continue here…]\u00a0<\/em> <\/span>We who invest look for patterns from previous experience.\u00a0 Some of those patterns help us to spot and avoid problems we have seen play out in the past, often to disastrous conclusion.\u00a0 We learn to worry over obsolete inventory, too rapid hiring, failure to spot industry trends that make an offering less attractive, and so much more.\u00a0 Most of us can tell specific stories of losses that led to these expensive and gut-wrenching lessons.<\/p>\n Here\u2019s a near miss that just happened.<\/strong><\/p>\n This follows from my previous insight: \u201cWhere there\u2019s mystery, there\u2019s margin.\u201d<\/em><\/strong><\/p>\n Asa result, the entrepreneur could avoid a fundraising effort, reduce working capital, make friends with the salespersons of multiple companies that could supply leads and references, and become instantly profitable.<\/p>\n Some fatal elements that might become only a near miss.<\/strong><\/p>\n So, what if that startup could not have raised funds? What if it had a hiccup in collection of payment from a large hardware order? \u00a0What if the hardware manufacturer had serious problems with product quality on site? \u00a0All these things which could have driven the company out of business when betting very large amounts on other companies\u2019 hardware would be avoided.<\/p>\n Why do we tell this story?<\/strong><\/p>\n Turning out the lights from a company following an existing business plan to extinction teaches us lessons. \u00a0Pre-thinking alternatives to the events causing the negative exit might just prevent it. \u00a0Which would you rather do?<\/p>\n","protected":false},"excerpt":{"rendered":" In my life as an early-stage investor, I\u2019ve been closely involved with so many businesses, there were bound to be numerous stories of\u00a0 actual and near failures, hopefully from which to learn lessons for all of us as we go … Continue reading ![\"\"](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2018\/08\/What-if-2.jpg\")
I just helped an entrepreneur to consider reorganizing his young business from being a value-added reseller into a software and consulting company. \u00a0It would not be handling the expensive hardware that is part of its required sale at all, other than to recommend alternatives and charge for coordinating the purchases of differing supplier products, oversee the installation. It could then charge for setting up, integrating, and training the company\u2019s software, all because its customers would not know how to do any of these important tasks.<\/p>\n