Gordon Woolf's Blog

Worst-case scenario: plan for it

In your business or even in life in general, have you worked out a worst-case scenario? It should be essential but I suspect too many people are unwilling to face the prospect of things going wrong.

Insurance salespeople will encourage you to consider what might happen if you had a fire, but few take it further than that, and the effects are often not those you can insure against.

Several recent reactions to changes in government policies, changes in the dollar exchange rate and surveys showing changes in consumer buying habits lead me to wonder yet again whether many business people ever work out what they'll do if things start to go wrong.

Those good at selling often overestimate their ability to sell -- but worst case is not always a lack of sales. As in the example I gave in the book Success in Store, it is also possible for a worst case to be caused by sales being too good. (Do you have access to funds to buy what you have sold, or, in a manufacturing business, the cash and/or credit to buy the raw materials?)

A lot of this is done with a spreadsheet. Just take the figures a bit further to the extremes. Yes sales in the convenience store we bought were poor, and even our own mishandling of customers might have been unable to make them worse, but what if road works started in the street outside and took way longer than were planned? I've seen that happen to others, and after putting off the staff and allowing for the lack of a need to buy stock, the overheads were still at a level which drew on all resources. (In the case I'm thinking of, the local authority was prepared to make a substantial contribution to promoting the strip shopping area when the work was done, but the businesses still had to get through to that point.)

The advertisement rate calculator included with my book How to Start and Produce a Magazine or Newsletter makes it easy to work out what would happen to income if a periodical publisher found all orders coming in for full pages instead of a mix of small and medium ads. But that is the kind of calculation which should be done with any business. I'm sure you've heard the joke about the business owner who admits that they are losing a dollar on every sale "but we make up for it in volume".

Retailers in Australia are currently trumpeting the benefits of a high dollar in lowering prices on imported goods, especially electronics. But have they worked out what they'd do if, over say a three or six month period, the dollar conversion rate dropped to half its present level -- which was where it was only a few years ago.

Computer retailers used to stock computers. Now few do outside of the demo stock on the floor. Not only did they learn to cope with price fluctuations but also with continuing upgrades in specifications. But a lot of stores went broke or closed because it was just too hard to cope.

In another field I went through some basic costings with a couple planning a restaurant. If successful it would have been a goldmine, but the most likely scenario was that they would be working their butts off for less than a living wage. Then I discovered that none of their forecasts included the cost of borrowing the admittedly fairly small sum they would have needed to get started. So, unless they started with queues outside their door on the first days they would have been going backwards slowly but certainly.

So think now of what could go wrong, and what effect it will have. If you cannot cope with that, you will be unlikely to cope with success.

Windows 7: should it be Windows Silver?

November 1985 saw Windows first shipped in the USA and not long afterwards in Australia. So I wonder why Windows 7 wasn't called Windows Silver?

I can still see quite vividly that MSDOS screen in front of me at the newspaper in the small High Country town of Myrtleford that required me to click on a file entry to start the runtime version of Windows which then started the desktop publishing program PageMaker.

I'd already used the same program with Apple Macintosh in Western Australia but a PC was half the cost. And had used Xerox Ventura on a PC with the GEM "graphic environment management" system on top of DR (Digital Research) DOS, but Windows was still a massive advance.

Businesses weren't buying Windows because they wanted to but because it enabled the program they needed to run. Even the most hard hearted accountant could see that new equipment was worth buying when it would pay its full capital and running costs in less than six months compared to how the job had been done before.

The hardest job, a year or two later, was persuading newspapers in the bush that they really needed a network to transfer files, and that "sneaker net" with a shoebox of 5.25" disks had had its day.

How to work internationally

I've been approached by a client in another country. What can I do now to prevent unnecessary complications later?

The Internet is truly international and gives the opportunity for many individuals and small businesses to work for clients around the world. So my answer to the above question was that you should do very few things differently to what you should be doing anyway.

One difference is that you should make sure that you agree what currency the payment will be in, when it will be paid and how it will be paid. And also make sure the work involved for that payment is stated very clearly.

Neither side will be happy if you find that making the payment costs as much as the payment itself. If the client is in one of the many countries where payments can be made by PayPal that would be good, and if you must accept payments by bank transfer make sure your bank knows all about the details you will need from them and what they will charge for processing while suggesting your client makes the same enquiries at their end. I've heard of transfers costing from $5 to a hundred dollars and more for quite small amounts of money (a few hundred dollars).

If you have a good feeling after a few initial email exchanges then it is likely all will go well. I have only had one client refuse to pay and that was a US company well known for its charitable work. On the other hand many many years ago when a firm in a country which ends in ...stan owed me a small sum they eventually got a US client of theirs to hand me a small brown envelope of dollars when I was on a business trip to the USA after the original client's government had made overseas payments almost impossible.

Most clients want the association to go well but it is still a good idea to do some internet searches on business and individual names and locations.

Then, as I have already said, do what you would do for any other new client. Ask for an advance and make sure that if a job will take a substantial amount of time that you get progress payments. And do not accept excuses for delayed payments. If the money stops, you stop your work.