Is your Business in trouble? – Part 1.

Monday, February 1st, 2010

2010 has only just begun and already I’ve noticed that the number of businesses in trouble seems to be on the increase.  Although the world economy is supposedly on the rebound, it’s clear that South Africa is lagging behind. I’m in the process of completing a book on the subject called "Business Blues- Why youve got them and what to do about them" and I’m hoping to release this in published form and as an e-book shortly.  However, I’ve had a number of requests from clients to help out recently and I thought I would start the process by releasing parts of it as regular newsletters, entitled "Is your Business in trouble?"  I’ll start with the introduction to the book to give you a taste…..

INTRODUCTION

This book is not meant to be yet another book on ‘management’ or ‘business leadership’. It is not meant to support one form of business structure over another. Its also not a "how-to" kind of book, offering some sort of recipe for success in the diverse world of business.

My fervent hope is that those who read the book will be helped, first of all, to get out there and start something worth doing because they want to do it; secondly, to make a success of it, and lastly, that whatever they do will leave a legacy for all those they worked with and for.

I believe that everything we do should have some sort of purpose to it, otherwise why do it at all?

Let’s not kid ourselves; we generally go into business to make money. Making a profit is the goal of all business – that’s a given, since no one is going to go into business aiming to lose money, are they?

The issue for all of us, however, is how we go about doing this. I’m not going to try and tell you, the reader, what kind of business you should set up!

I am, however, going to say that whatever the kind of business, there is a right way to do it, and a wrong way to do it. And I’m not just talking about ethics here!

The book is also for everyone who believes they can start and run a business – for everyone with an entrepreneurial spirit. I’m not going get into detail on complex administrative structures, or sophisticated computerised systems. I’m also not going to fill this book with fancy business terminology and "accounting-speak" – much of which today even confuses accountants. I just want to get down to the basics – where the rubber hits the road, in the trenches! I’m hoping it will be read by business owners who will witness with some of the real-life stories; and I’m also hoping its going to create a lot of ‘Aha!’ moments at the same time.

It will probably be glossed over by high power execs in large corporations who think it’s not relevant to big business. But, it is and it will be! Because the principles in the book are relevant to people who make decisions, no matter how big those decisions will be in terms of the amount of money or people they involve. Because when you drill it down, business is all about people! Nothing else!

Larger businesses usually have access to highly qualified employees who can guide them through some of the troubled waters businesses face from time to time. Small-to-medium sized businesses don’t usually have that luxury. Its my hope that this book will help to fill that gap.

So, what is a "Small-to-medium-sized" business?

Well, it could be……….

  • A business owned by an individual!
  • A business owned by a number of people.
  • Business with small and large volumes of sales.
  • Best defined as one that is managed, or owned by a single person (or a partnership) who is actively involved in the day-to-day running of the operation.
  • The privately owned business in which the owner or owners have the responsibility for its direction and destiny.

They may be manufacturers, wholesalers, distributors, contractors, retailers and even professional service firms.

They may be involved in the food industry, transport, engineering, construction, fashion and even advertising. (or any one of a host of others)

Small businesses make up a substantial portion of the world’s economy and employ more people, in total, than any other type of business. Therefore, it is important that they be healthy and profitable!

A large number of them are not!

In fact, as much as eighty percent of all new small business start-ups will fail within the first two years!

All of my working life has been in the small-to-medium business environment. I have worked for smaller businesses, as an employee. I have owned smaller businesses. I have also been in partnership with others in small and medium-sized business ventures. The businesses have ranged in size from the typical ‘one-man-show’ to a private company employing over 400 people and turning over in excess of R500 million (in today’s terms) in sales in a year.

When the economy is pumping, firms of every size (including tiny privately held concerns), and in every industry, tend to borrow money to expand. For some, growing their businesses means bigger capital expenditures in both staff and technology. It’s exciting stuff, and the promises of success can easily carry us away.

Today, with sales down and the banks tougher on credit, debt burdens are crushing many firms–especially small businesses. Many of them are in distress – to put it mildly! And, they don’t know what to do about it much of the time – going through the motions, waiting, and hoping that somehow, someone is going to step in and help – that a miracle is just around the corner. Much of the time it’s not, and the inevitable happens.

If you’ve never been there, it’s important to understand that when this happens, everything becomes a problem. Nothing seems to go right! The light at the end of the tunnel just seems to be the train bearing down on you from the other end.

But I do have good news for all those in business who feel they’re never going to come right. You can change, and what seems like imminent failure can be turned around. But, it’s going to require a lot from you.

The first thing it’s going to require is a firm commitment to change, and the first thing that will have to change is YOU!  

If you don’t change the ways you run your business, don’t expect it to get better.  It’s like trying to lose wieght by sticking to the same diet.  Guess what – you’ll stay fat!  In the same way that we make lifestyle changes to reduce our weight and get fitter, we need to make business lifestyle changes – to get more efficient and more profitable!

It will mean changing some of your old management/leadership habits and introducing new, more effective ones. And, it will mean adopting these changes in a new business lifestyle. Many of you fail to see just how important this is. I hope to change that kind of thinking in this book.

The last twelve years, for me, have been spent building up a Business Coaching practice, by direct consultation and indirectly through our web-based e-service.

In this time, I have come to agree with the general view that the reasons over 80% of small businesses fail within the first two years of their existence is one or more, or a combination of, the following:

  • Insufficient start-up capital
  • Poor management
  • Inadequate or non-existent financial control.
  • Excessive spending
  • Inadequate marketing
  • Major "project" failure.

It is also generally accepted that 90% of small businesses fail because of a lack of knowledge. This "lack" of knowledge is in the area of business and financial management, not within their chosen field of expertise.
You may be the most amazing cabinetmaker in the world, but if you don’t know how to manage the financial side of your business, it will fail! A great plumber doesn’t necessarily run a great plumbing business.

I also know that most small business owners have very little time to read anything! They spend inordinate amounts of time trying to run their businesses and end up working so hard they don’t always work smart! Sadly, lot’s of the business books available to them out there are also not that easily applicable.

This book will, I hope, attempt to address each of these issues in the simplest way possible, providing some key ‘checks and balances’, that will introduce the ‘smarts’ into the operation.

If you’ve bought this book it’s either because you already recognise some of the shortcomings in your own business and you want to take steps to avoid disaster, or you’re about to embark on a new venture and you want to make sure you do the basics right.

It’s probably the cheapest, yet most effective insurance policy you’ll ever take out! I’m hoping it will prove to be one of the best decisions you will ever make too!