Pre-mortem: how to run one on your business idea

A pre-mortem is an exercise where you imagine your project has already failed and write down why. On a business idea, it leaves you with the handful of threats most likely to close the business, a sign to watch for each one, and a response you decided on in advance.

This guide is for a solo founder, and the example is a physical product sold online with pre-orders. Run it once you have decided to go ahead and before you commit real money, such as a first stock order.

What is a pre-mortem?

The term comes from Gary Klein, a research psychologist, and the usual reference is his 2007 Harvard Business Review article, "Performing a Project Premortem". A post-mortem works out why a patient died. A pre-mortem works out why a project failed before the project has started.

Klein drew on a 1989 study by Deborah Mitchell, J. Edward Russo and Nancy Pennington into what they called prospective hindsight: explaining a future event as if it had already happened. In their first experiment, setting the event in the future or the past made little difference. Certainty did: when people explained an outcome presented as certain, their explanations were longer and more of their reasons described specific events. That is why a pre-mortem opens with "it failed" instead of "what might go wrong?".

Most guides describe it as a team meeting with a facilitator. On your own, nobody pushes back on your list, so step 3 adds a check for the threats you'd rather not think about.

Why do small businesses fail?

Of the US private-sector establishments that opened in the year to March 2024, 77.9% were still open in March 2025, according to the Bureau of Labor Statistics. Of those that opened in the year to March 2020, 51.4% were still open five years later.

The BLS counts closures but doesn't record why they happened, and the reasons depend on the business. A blanket brand and a bakery close for different reasons, so the list worth writing is the one for your business, with you running it.

The worked example: a wool blanket brand

The numbers are invented and round. A founder plans to sell a recycled-wool throw blanket for $120, made by one mill overseas, alongside a full-time job. Each blanket costs $40 landed (made, shipped and through customs). The mill's minimum order is 300 blankets, so the first order costs $12,000. Payment fees, packaging and postage take another $20 a sale, which leaves $60 a blanket before marketing. The plan assumes a customer costs $30 to win.

The $40 is paid up front in the stock order, so each sale brings $70 back toward the $12,000 ($120 − $20 − $30). It takes 172 sales to earn the order back, and the profit is $9,000 if all 300 sell. Pre-orders open in early summer, and the blankets need to arrive before the fall.

1. Write the goal for a year from now, in numbers

Pick a date about a year out and write down what the business should have done by then, in numbers. The founder wrote: "By next October, 300 blankets sold, $9,000 profit, on eight hours a week."

You'll measure failure against that sentence. A side business can also end without a crisis: the shop stays open, but you've stopped posting, restocking and answering email. Count that as failure too.

2. Imagine it failed and list every reason for ten minutes

Write the failure down as something that has already happened: "It's October next year, and I've closed the business." Then set a timer for ten minutes and write every cause that comes to mind, petty and personal ones included, such as "I got sick of answering the same customer email". Don't rank anything or look anything up yet.

The founder's list had nine causes. Most were about money and the mill, and none were about the founder's own time.

3. Follow one order through the business to find what's missing

A list written from your head leans toward what you already worry about. To find the gaps, follow a single customer's order from start to finish and ask what could break at each stage:

• how the customer finds you, and what that costs
• what they pay, and what's left after fees and postage
• how the product is made, and by whom
• how it gets to them, and when
• what happens next: reviews, returns, buying again
• what each week of this takes from you

Then add anything that is unlikely but would close the business on its own. For the blanket brand, that was the container with the whole order being lost or held at port for months. The founder's full list:

4. Keep the three that would close the business

Cross out anything you could recover from with a bad month. From what's left, keep the three most likely, given what you know about this business. Three is few enough to check every week alongside a job. Leave the others on the list for the next run (step 7).

A threat that would arrive without warning can't be given a sign in step 5. If one of those would close the business, cover it now with something small done in advance. The founder kept the first three rows, and asked for cargo insurance to be priced into the freight quote.

5. Give each threat a number or date you'll check

Each threat needs a sign you can check on a set day: a number crossing a line, or something that should have happened by a date and hasn't. "Fewer than 10 orders in a week" is one; "the business feels slow" is too vague to check. Set the line where there is still time to act. The founder's three:

• Customer cost, checked once $1,500 of ads has run: ad spend divided by pre-orders. At $60 a customer, selling all 300 blankets makes nothing. At $45, the profit if all sell drops to $4,500 and it takes 219 sales to earn back the order.
• Delivery, checked on August 31: has the mill confirmed a production start date?
• The founder's time, checked weekly: have orders waited more than three days to ship, two weeks running?

6. Decide now what you'll do when each sign appears

For each sign, write the first thing you'll do in the week it shows up, as one sentence starting with "If". Make it something you could start within days, such as pausing ads or emailing the mill.

Make one of them a stop point before your biggest commitment, which here is the $12,000 order. Once the deposit is paid, that money is spent whatever the numbers say, so the line has to be set before. The founder's three:

• If $1,500 of ads brings in fewer than 50 pre-orders, the mill order waits. I'll keep pre-orders open and spend two weeks on calls with buyers to find out why.
• If the mill hasn't confirmed a start date by August 31, I'll email every pre-order customer that week with the new date and the offer of a full refund, and pause ads until the date is firm.
• If orders wait more than three days to ship for two weeks running, I'll move packing to the fulfillment warehouse that quoted me in the spring.

The third works because of a job done earlier: the founder got the warehouse quote in the spring, when there was time to compare.

7. Put the checks in your calendar and rerun before each big commitment

Put each date and number in your calendar so the checks come up without you having to remember them. Rerun the pre-mortem before each large commitment: the first stock order, the second, a bigger ad budget, or cutting hours at your job. It takes about an hour, and each time some threats will have gone and new ones arrived.

Draper's Jack Dorsey Exercise workshop is a guided pre-mortem: it takes you through these steps using what your earlier tests found about demand, competitors and costs.

When a pre-mortem won't help

• Before you've tested demand, a pre-mortem mostly lists guesses about whether anyone wants the product. Test demand first, then run it.
• If the most you can afford to pay for a customer is less than customers in your market usually cost to win, the problem is with the idea itself, and a feasibility study is the better tool.
• For a service or a digital product the method is the same, but the stop point moves to wherever you commit the most: a lease, a hire, or leaving your job.
• With co-founders, have each person write their list alone before anyone shares, as Klein's version does, so the first person to speak doesn't set the agenda.

Related questions

If one of your threats is a claim against the business reaching your personal savings, read LLC or sole proprietor. If your costs are still estimates, the MOQ guide shows how to size the first order against them.