[This article first appeared in the July 2012 Charlotte County Chamber of Commerce Newsletter].
Last month, I wrote about the first five reasons
of my top ten reasons why businesses fail.
I based my selection from the 30 reasons listed in Napoleon Hill’s book “Think and Grow Rich”. Here are the second five in no particular
order of importance.
6. Lack of a well-defined power of decision.
Making decisions is one of the key skills necessary to be a successful
entrepreneur. If you're unable to make quick decisive plans with regard to your
company, indecision results in no decision.
In the new economy, businesses that fail to react in a timely manner
will be left behind and not in business for much longer. Your business’ success depends upon you making prompt decisions and providing
the required leadership for your employees. As the owner of the company, your
goal is not to be friends with your employees, but rather, a leader of them,
for not only your benefit, but for the benefit of your employees and their
families.
7. Over caution. Part of being an
entrepreneur requires the ability to take risk.
Any time someone opens their new business, there is that fear that no
one will come through the door. However, if you have spent the time, putting
together a proper business plan and required systems in place for not only your
services but you're marketing as well, the risks are diminished. Being too conservative, over cautious and not
willing to take any chances will lead to failure. One philosophy followed by some entrepreneurs
is “ready, fire, aim”, meaning that if you just
keep “aiming” until you get the product, service or advertisement “perfect”, you may never make the
decision to “fire” and take the required action to move your business into
profitability.
8. The habit of indiscriminate spending. Obviously a clearly defined
budget that your business sticks to is crucial to a business' success. Spending
more than budgeted because you have a good month is a big mistake, and not
planning for possible downturns and bumps in the road with regard to your business
is fatal. Saving for a rainy day is an
important part of your business plan.
Budgets must be monitored carefully and adhered to religiously.
9. Guessing instead of thinking. Too often
assumptions are made by business owners without a factual basis. In my line of
work, I often have clients come to see me after making bad decisions when we
could have directed them towards a proper path. Consultation with professionals
such as attorneys, accountants, architects, engineers and other advisors, is
invaluable and ultimately will save you more money than trying to fix mistakes
down the road.
10. Lack of capital. Again, if I were
ranking these, this would be number two. Often I see owners starting to launch
a business which, if given time, would be successful. However, they are
undercapitalized, expect to reap great revenues in a short period of time, and
by month six, they can't even pay their rent.
I generally tell clients when starting a new business that they should
have at least 6 to 12 months of their personal living expenses put away in order
to survive in case there is no money coming in from their business, and that
they should have access to lines of credit (not
credit cards or a second mortgage on their home) or other funding
sources that will carry the business through the first 12 months based on
conservative projections of income.
I hope the foregoing will give you something to
think about with your business. Please send me your questions or comments at mark@martellalaw.com, and I'll be happy to discuss these with you further.
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