We’d look at this in a little more detail later in this article. But first, let us examine some of the statistics on small business failure rate, not to alarm you but impress upon you the importance of what is presented here. Above all, this is to get you prepared and encourage you to take positive action by plannning against failure.
The Statistics:
According to a 'Dun & Bradstreet' report, start-up businesses with fewer than 20 employees, have only a 37% chance of surviving the first 4 years of being in business, and only a 9% chance of surviving to 10th year (i.e. 91% of failure to reach their 10th anniversary) . Interestingly, of these failed businesses, only 10% of them close involuntarily due to bankruptcy and the remaining 90% close because the business was not successful or profitable i.e. did not provide the level of income desired or was too much work for their efforts relative to returns.
Further more, 'Dun & Bradstreet' statistics also indicates that 88.7% of all business failures were due to management mistakes, listing some 12 points as the main factors termed management errors that eventually lead to business failures.
These were summarized as:
1. Lack of market awareness.
2. Family pressure on time and money commitments.
3. Going into business for the wrong reasons.
4. The entrepreneur blindly falls in love with their product/business, failing to recognize warning signs.
5. Lack of a clear focus.
6. Unforeseen circumstances - being in the wrong place at the wrong time.
7. Lack of financial responsibility and awareness.
8. Too much emphasis on money.
9. Entrepreneur gets worn-out and/or underestimated the time requirements.
10. Ego or pride - not willing to seek for expert assistance when in trouble.
11. Optimistic/Realistic/Pessimistic.
12. Advice from family and friends.
Very close scrutiny of these reasons leads one to the identity of an underlying factor and a common inherent flaw in the whole ethos of entrepreneurial business operations. I have found this flaw to be present in the hundreds of failed business cases examined in the course of my business consulting career, confirming as the root-cause, the misapplication of ‘PAM - the law of business success.
P.A.M Now you may be asking, what is P.A.M? It’s not a kind of hideous business disease, the acronym stands for P = Plan or Planning Mode; A = Activity or Action Mode; M = Maintain or Maintenance Mode. I’m sure you’ll agree that this is not a rocket science, but the same plain old commonsense you could add. However, if this is that simple, why are so many people and businesses get caught up in its nasty death trap?
In my 17 years of performance management and design practice, I have not come across a single principle that can make or break the backbone of a business very quickly than this one. Even close examination of businesses that appear to apply this principle somewhat show signs that majority of them still get caught in this nasty net.
It then begs the question why is this the case? Look at it this way and answer the question in this simple illustration. You’re planning to deliver some perishable goods to a warehouse using a horse-pulled cart. Would it matter the sequence in which you place the essential components of that mode of transport?
I’m sure your answer is yes, and that’s precisely the fundamental error a lot of businesses make in applying this apparently simple principle. 'P.A.M.' looks simple and straight forward enough but on close scrutiny, it does turn out not to be as simple as it first appears.
I called it a law because there lies within it, an underlying dependency matrix between the three parameters i.e. there is a right sequence and a wrong sequence of execution of the three elements.
‘P.A.M’ As A Law:
The correct and irreversible sequence of application of this law is P==>A==>M. In this case, the maintenance business mode is dependent on and comes after business actions or activities. Also business actions flow directly from business plan or planning mode.
It must be pointed out however that it is often difficult to isolate uniquely these three parameters because of the interconnectivity across the three boundaries. For example within an ‘action’ mode, there would be internal ‘PAM’ unique and separate from the external Plan that gave birth to that ‘action’.
This means that when executing a task (an action), there is the actual doing of the task, and simultaneously the on-going management of the task implying dynamic planning and dynamic maintenance of the action being executed.
Also, not all ‘PAM’ functions will contribute to the bottom-line of a business. Consequently as a business owner or operator, you’re better off spending your limited resource of time on those aspects that directly impact on your dollar earning, leaving the support but still essential 'PAM' to others. DIY approach in this regard will inevitably cost you money in terms of lost earnings, poor productivity, and poor profit.
My candid advice would be to give this aspect of setting up the initial business framework for 'PAM' to professionals. If you’re already in business and didn’t really thought about this when you started out, it’s worth asking for specialists in this field to take a brief look at what’s happening within your business operations for unbiased appraisal. In almost all cases, you’ll be glad you did.
Conclusion:
I have endeavoured to cover the essential workings of this law here as it relates to the success of your business now and for the foreseeable future. That is a very brief introduction on the law of PAM as it relates to small or large business operations.
For further details, updates and other articles or if you need assistance with anything you’ve read in this article, please visit my website at www.cash-pot.com and use the links to navigate the site particularly to the ‘Services’ to small businesses webpage.
PAM THE BUSINESS LAW OF SUCCESS - To learn more about this author, visit Sam Ediscot's Website.
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