Failure: Out of Sight, Out of Mind
Author: Sasha Bolotova
A successful business is not only a result of what you do, but what you do not do as well. In order to be successful, there are certain things that must be done while there are others that must be avoided. I recently came across a study conducted by the SBA of 20 firms which discussed why ten of the firms failed while the other ten were successful in their prosperous years. To help you avoid failure within a small business, I would like to discuss several avoidable management traps highlighted in this study.
The first trap discussed is inadequate records, which nine of the ten failed businesses had. It is extremely important to make sure that all finances are kept in order, because all nine businesses discussed in this study had accountants that said they couldn’t even reconstruct simple forms due to the unsorted records kept by the owner. Going along with finances, it is important to not expand beyond available resources. When a company grows too rapidly and the bookkeeping system cannot keep up with the expansion, shortcuts are made which tend to lead to disastrous outcomes. Lack of information about customers is another important small business failure factor. You have to always be up to date on your customers’ information or you might end up like the failed businesses in the study that had bankrupt customers who never paid their accounts. Just as it is important to know information about your customers, it is also important to have a variety of customers as well. Diversifying your business market is crucial to staying successful. If you only have one main customer, then your business will fail if that customer ever decides to terminate the contract.
Many small business owners hire family members to work for their company, but this has to be handled correctly and carefully. Nepotism must not take over when having family members working for you and result in high salaries with small contribution from workers because that will ultimately lead to business failure. If hiring a family member is done correctly, it could lead to business success in the future because shaping a successor is always important. Although it is not a pleasing thought, one day or another, you will need to retire either due to old age, illness, or just because you are ready for it, but either way having someone to continue running your business correctly is essential. This ties into the final trap discussed, absentee management. Simply put, if you are not able to operate your business at all times, it is bound to fail. So if you think you are not able to handle your business 24/7 then you need to start thinking of shaping your business successor, or at least a leader that you can count on while you are away.
Being aware of at least a few of these business traps is necessary in order to build and manage your own successful small business.