Tag Archives: Leadership

Why Businesses Fail? – Avoiding common statistics

From our “Ask an Expert” blog – John L. asks –
“You mentioned in your recent article (Why Marketing alone can’t save your business) that a business should focus more attention on fixing common reasons businesses fail before addressing Marketing. What are those issues you are referring to?”

Thank you for the question and reading our blog.  In that article we made the point of when people are searching for a Consultant, the current Google trend is to search for one that will get more business in the door opposed to how to fix a failing business.  My interviews with many Small business leaders shows that many owners may feel Top line revenue is the only thing needed to fix an ailing business, when in fact there is often much more to it than that.  Our concern is that people don’t always know what signs to look for or how to judge the strength of their businesses ability to generate revenue other than looking at a Marketing fix.

So what are the top reasons a business fails?  Our company has researched many different sources to find 2 common reasons.  I have presented this concept to MANY Business Bankers, Accounting groups, Accellerators and Chambers, who ALL agree with our approach.

The Top 2 reasons Business FAIL are:

  1.  Lack of Education – Business Acumen & Experience
  2.  Lack of Timely or Appropriate Funding
 Business Acumen is a combination of a variety of skills, experience, decision making and planning ability.  Many people have a specific expertise which may be enough to start a business, but other skills are needed to build a successful business and this creates a skills gap.  Not gaining or hiring for those skills can leave a gap in Business operations, which over time devalues a business.
Appropriate funding refers to funding at different phases of business growth.  Start up funds, seeking capital growth funds or credit line at appropriate times, and managing Revenue capabilities (or cost controls) that maintain budgeted margins.

Some common statistics –

50% of Small Business fail the First year

65% of Small Business fails within 3 years

~80% of Small Business fails with in 5 years

of those


 

80% of Start ups fail due to lack of Management Knowledge and skills

* SBA,D&B,US Census, Inc Magazine


 

92% of Small Business fails due to poor

Management Acumen

                    * Dunn & Bradstreet


Failure is 2X more likely due to Quality of Management than due to External Factors

                                                          *National Bankruptcy Annual Reports


90% of FAILED Business is due to lack of Quality Management.

of these:

48% classified as incompetence

42% classified as inexperienced

                                                                        *IMC (International Management Consultants)

These are pretty sobering statistics and speak to the point my business continually addresses which is;  there are multiple areas to build upon to strengthen and grow a business.  There is a growing need for people capable of Holistically Assessing and Planning.  Where does a business person start when they want to look at their own business you ask?  Start with these common traits we have found that support the 2 Most common reasons listed above.

Reasons a New Business FAILS

  • Lack of understanding the effort needed
  • Inadequate financing
  • Lack of planning
  • Unrealistic expectations of success & salary
  • Inability to commit
  • Unwillingness to take responsibility

A key problem for Start Up Business is that they don’t know what they don’t know.  Seeking the advice of people that can both Mentor & Lead them and their plan development helps significantly .

 

Reasons Existing Business FAILS

  • Poor cash flow management
  • Seek funding too late
  • Absence of Performance Monitoring
  • Lack of target Audience research
  • Poor inventory management
  • Failure to identify your own Strengths Weaknesses (SWOT)
  • Insufficient professional resources

Anyone who has run an Organization (Profit or Non Profit) knows how many hats you have to wear.  There are so many obstacles that come up, you become seasoned in researching and solving your own problems.  The difference between a Pass or FAIL here we have found is often a combination of 3 things.

  1. Over confidence in your own assessment capabilities
  2. Misinformation
  3. Closed mindedness

 

In post mortem interviews with owners or Executive Directors, a common response is “I should have this, or I should have that”.  Retrospection shows the same 3 conclusions listed above.  There are many other complicating issues and each case is unique, but if you are in a position where you need to do something (and quickly) to “turn things around” I suggest looking (in addition to Marketing) at these issues to insure you can make the most of your revenue.

Last thought – If you are just looking to increase your profit line by a few points, improving internal efficiency can add as much to your profit line as adding to your Top line revenue.

To learn more about our unique Assessment and Efficiency Services  ContactUs-Gray-Primary-16

Carpe diem!

 

 

Can YOU beat earnings with lower revenue?

Ironically, today’s earnings report from Wal-Mart proves the point I made in my Blog      “Low earnings /Low Profits – What to do?”

I have a love/hate relationship with Wal-Mart.  I often shop their begrudgingly. I would prefer to support a local business, but when I am buying toothpaste my choices are generally a Wal-Mart, Chain Drug Store, or grocery store.  There really aren’t too many local businesses to buy toothpaste from.  Wal-Mart is cheaper, and there are always other items that I get while there.  They save me time and money and there for they are a value.  I support local when possible, but frankly I couldn’t afford to buy as many things if I shopped only local and I am a typical American who wants as much stuff as possible.

Yesterday Walmart announced that 2015 Q4 revenue was down, and they expect very little sales growth for all of 2016.  Same store sales were reported to increase less than 1% in 2015. To insure they can meet or beat earnings, they have decreased operation costs and reinvested in Human Capital, choosing to focus on culture over new market channels.

Announcing the closure of 269 stores worldwide and releasing close to 10,000 workers will surely get a lot of attention.  But Wal-Mart is focusing the narrative on developing its Culture.   Wal-Mart is investing by raising the wages of it workers. This is very strategic since they have a history of Legal and Public Relations issues around wages and practices.  Improving employee engagement will help drive business into their well established retail presence.  I support this strategy, but I think they have a lot of work to do besides raising wages.

Walmart recognizes that the growth of online shopping has impacted brick and mortar and they have already begun testing new strategies to target these areas.  Experiments in the Grocery offerings (Organic Product selection & home delivery), introducing their price matching app (which is awesome), the ever expanding electronics section, and the “No Questions return policy” to name a few will go along way to exceed customer expectations and build loyalty.

So…… sales are stagnant, they are giving nearly everyone a raise, and adding to their operational costs….how is this a good plan?

Well to start, the Thursday announcement also mentioned that they beat earnings and brought in a higher dividend than forecast.  Earnings came in at $1.49/ share on a projected $1.46 and quarterly dividend was .50 on a projected .49.  At the open of today their stock is down ~4% and they have fallen ~27% over the last 12 months.

But they still had a 2% increase in dividends and profit!

What would your business do in this situation?  Can you bring in a higher profit while loosing expected revenue?  Would you give a raise to help increase store sales?

Proper planning, strategy, and vision makes the difference.

Carpe diem!

A Great Quote for Leadership

“Begin with the end in mind” – Dr Stephen Covey

 

Known as habit #2 from 7 Habits of Highly Effective People, and one of my favorite all time quotes.  This is about vision and planning.  Vision for the workplace, for family life or for personal growth, and it is ultimately about personal leadership. You can’t manage others successfully until you can manage yourself.  You can’t lead others until you have personal leadership.  Covey speaks about the gap all humans can place between stimulus and response; and how making the right decisions’ in that gap lead to positive outcomes.  Some refer to this as the internal compass or as “True North”.  This is also the famous “personal mission statements” exercise habit.  Ever try to write your own epitaph?  Take a Covey Leadership course and you will!

While this is designed for personal management it can be easily translated into organizational mission, action plans, and methods chosen to measure success by an organization.  Understanding what is important and how you want to get there has helped change the business environment in this country.

Some confuse this to simple “Goal Setting”, as steps to completing a task but it is much more.  Goal setting helps you complete something, “Beginning with the end in mind” helps you know it was the right thing to complete!

It starts with understanding what is important to you first and foremost.  And then doing it!! …..Personal leadership

I love this stuff.

Carpe diem!