{"id":225772,"date":"2024-02-06T18:00:06","date_gmt":"2024-02-06T18:00:06","guid":{"rendered":"https:\/\/www.markperlbergcpa.com\/why-a-pre-mortem-analysis-for-any-new-atlanta-business-is-necessary\/"},"modified":"2024-02-06T18:00:06","modified_gmt":"2024-02-06T18:00:06","slug":"why-a-pre-mortem-analysis-for-any-new-atlanta-business-is-necessary","status":"publish","type":"post","link":"https:\/\/prosperlcpa.com\/blog\/2024\/02\/why-a-pre-mortem-analysis-for-any-new-atlanta-business-is-necessary\/","title":{"rendered":"Why a Pre-Mortem Analysis for Any New Atlanta Business Is Necessary"},"content":{"rendered":"
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Failure usually isn\u2019t on your mind this time of year. <\/p>\n

In fact, it\u2019s the opposite. In January, you\u2019re thinking of ways to make your Atlanta business succeed. You\u2019re looking at last year\u2019s data and setting growth goals. There\u2019s excitement in the air, and you\u2019re buzzing with optimism. <\/p>\n

But that doesn\u2019t always help you see clearly what happens if you fail. So, what if you considered failure now, you know, as a sort of pre-mortem in your goal-making?<\/p>\n

See, even with data informing your thought process, it\u2019s really easy to idealize where your business is going and fail to make the right choices. And because you\u2019re likely only thinking in terms of success, you miss the wisdom of considering what happens if you fail to reach that goal. <\/p>\n

And, if you look well enough, with the right perspective, failure is actually pretty easy to analyze. <\/strong>People don’t like to admit it, especially in advance. As JFK once said: Victory has a thousand fathers, but defeat is an orphan.<\/i><\/p>\n

Why do people, organizations, and businesses fail? Often it’s because they don’t take a clear-eyed look at things, especially when they SHOULD \u2014 which is right before things get going.<\/p>\n

The reason I raise this right now is that business observers (like me) are talking about the <\/strong>massive surge of new side hustles<\/strong><\/span><\/a> among Millennials and Gen Z right now. <\/strong>While not all of these side hustles are not entrepreneurial in nature, many of them are. And the truth is, the middle generation is doing so out of financial necessity as inflation continues to put a demand on their bank accounts. And we all know economic moments like these are often the cause of great innovation.<\/p>\n

But, sadly, the data tells us that most U.S. businesses fail within the first 5 years. And that\u2019s unfortunately as true for Fulton County businesses as it is for any other.<\/p>\n

Why? Often … lack of clear-eyed planning. <\/p>\n

Here’s what I mean…<\/p>\n

Why a Pre-Mortem Analysis for Any New Atlanta Business Is Necessary<\/strong><\/span>
“Not only must we be good, but we must also be good for something.” \u2013 Henry David Thoreau<\/i><\/span><\/p>\n

Too many entrepreneurs are blind optimists. (And yes — too many accountants are blind pessimists, I admit.)<\/i> <\/span><\/p>\n

Aside from the financials of a new venture, there are obviously other factors that play into its outcome. And my gut is that the people on your team already know what they are. They’re probably not writing a book or preparatory articles about it (yet), but they probably have some good ideas.<\/span><\/p>\n

Nearly <\/span>45% of businesses fail in the first five years<\/span><\/a>. And often, the ones that linger past that point are alive in name only. Yet very few entrepreneurs actually believe they have a less than 50% chance of success. They are convinced that those statistics only apply to the other<\/i> person’s ideas.<\/span><\/p>\n

The concept of a pre-mortem was designed to help overcome these natural human tendencies to ignore real threats to a business plan. A related concept, the postmortem, or autopsy, was coined by the medical community to determine the cause of death. <\/span><\/p>\n

Sometimes we wish for hindsight’s clear vision beforehand. If failure is the most likely outcome, the earlier you can recognize it and change course, the better. The pre-mortem looks into the future and attempts to predict what a business venture autopsy will reveal.<\/span><\/p>\n

In his book <\/span>The Power of Intuition<\/i><\/span><\/a>, Gary Klein offers a five-step exercise to help teams overcome the overconfidence bias. Research has found that people are more clearly able to understand and describe the risks of a venture when they conceive of the failure of their project as certain<\/strong>. If failure is only a contingency, the hopes and aspirations of all involved will neuter any attempts to assess the most dangerous risks.<\/span><\/p>\n

Before you can begin an effective pre-mortem for your business, make sure that everyone on the team is fully familiar with the new venture that will be assessed for failure. This exercise may require an initial presentation and some additional reading so that all participants have a full understanding of the issues involved. Schedule about an hour in a conference room. Each person will need several sheets of paper.<\/span><\/p>\n

When all arrive, begin by claiming to look into a crystal ball to see the outcome of this new venture. Oh no, the future is cloudy but disastrous. The project is a complete and total failure. Your partners and your clients are upset. No one on the team is talking to one another. <\/i><\/span><\/p>\n

But your crystal ball will not reveal how this happened. The question of the hour is, “What could have caused this?” Ask each team member to suggest 10 reasons for the failure.<\/span><\/p>\n

In the second step, each member of the team quietly takes three minutes to write down all the reasons they think failure occurred.<\/strong> This decentralized free association will produce many interesting ideas about how this venture may have failed.<\/span><\/p>\n

All the participants must be given the freedom to share ideas that in other situations would be considered impolite. Too many teams get stuck in a psychological state of groupthink where opposing feelings of loyalty and fear both lead to conformity of ideas. The most pressing challenges are not likely to be shared in an environment that lacks the freedom to speak them.<\/span><\/p>\n

The third step involves repeatedly going around the room as each person shares one item on their list and a facilitator records these ideas until all have consolidated their lists into one master list.<\/span><\/p>\n

The fourth step is to prioritize the ideas that grew out of the collective brainstorm. Which two or three appear to the group to be the most threatening? Have each person write these down independently before sharing as a group.<\/strong> Sometimes, the most polished and eager public speakers can be so convincing that others in the group neglect to do their own reasoning.<\/span><\/p>\n

The final step in your pre-mortem is to reassess the new business venture.<\/strong> Are the opportunities worth the threats involved? Are there ways to strengthen the plan to forestall fiasco?<\/span><\/p>\n

A pre-mortem has been proven to be effective because it involves a shift in perspective. It’s the difference between asking, “What could go wrong?” and, “What has <\/i>gone wrong?” The first is a theoretical future perspective, and the second is a historical fact.<\/span><\/p>\n

An additional, but equally important, benefit of this type of analysis is that it allows team members to be valued for their unique perspectives and observations. Building a shared vision and ownership is vital for developing the most effective teams. Allowing this team to effectively question their own assumptions helps to counter any preconceived ideas.<\/span><\/p>\n

So, I ask you: Are you willing to send your best ideas to the grave?<\/strong><\/i><\/span><\/p>\n

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And if you want some help in seeing these things clearly, we’re right here: https:\/\/calendly.com\/d\/46r-49m-93k\/10-minute-intro-call<\/a><\/p>\n

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Warmly,<\/p>\n

Mark Perlberg<\/strong><\/p>\n

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