Denial: Worst Case Scenarios
A common practice in writing business plans is to offer three scenarios: most-likely, best case and worst case.When I see worst cases presented in most business plans, they are almost always not the worst case scenario. They are most often a less optimistic variation of what the entrepreneur thinks will actually happen. The real worst case should be this: if things don’t go as planned and the deal fails, what is the outcome for investors and lenders?
Entrepreneurs seem to operate under the assumption that if they don’t plan for failure, it can’t happen. If they don’t ever address the real worst case, investors and lenders won’t think about it.
I get push back on thinking and planning for worst case from my students. “Don’t you think my idea is any good?” That is not the issue here. Even good ideas can fail, as most opportunities come from a dynamic, changing environment.
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Chuck Huckaby on October 27th, 2006 12:30 pm
I think really worst case would be losing everything in the business and having your house foreclosed on or a suitcase nuke being detonated in your fast food franchise.
Probably the reality is that lenders would tire of reading this all day and prefer a bit of denial, but the better your worse case scenario, the more likely you are to be able to write end-of-the-world-as-we-know-it novels.
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