The Business Autopsy A Fact Of Life
The Business Autopsy A Fact Of Life
Starting a business is never easy and the odds of your success or failure are about even money. The fact is, approximately half of all small businesses fail within the first four years. And a large percentage of those failures occur within the first year. These are the statistics that keep many entrepreneurs awake at night. Like Sisyphus, always pushing that boulder to the top of the hill only to have it tumble back to the bottom each time, you never know when you're going to lose your grip on your business and have it tumble back over you.
OK, so far in this column I have managed to squeeze in references to modern American television and ancient Greek mythology. Enough highbrow beating around the bush. Perform the autopsy and learn from it. Only by knowing the real reasons your business died can you identify and hopefully stave off those maladies before they take you down next time, if there is a next time. And if you're a true entrepreneur there will be a next time, trust me on this.
There are many reasons why businesses fail, but according to a recent survey by U.S. Bank, the majority of business failures can be attributed to three reasons: bad management, bad financial planning, and bad marketing.
Bad management comes in many forms. The survey showed that seventy-eight percent of the business failures examined were due in part to the lack of a well-developed business plan and a business owner who had no business being in the business he was in. In other words, the business owner did not have an adequate knowledge or a thorough understanding of the business he had chosen to start. This is why software entrepreneurs like me don't start shoe stores. I have feet, I wear shoes. That's not enough to qualify me to go into the shoe business.
Next, seventy-three percent of the business failures in the survey were also manned by owners with rose colored calculators. These business owners over-estimated revenue projections (the number of expected sales) and under-estimated the burn rate (the amount of money required to sustain the business per month).
It gets better. Seventy percent of the failed businesses in the study were led by entrepreneurs who were in denial regarding their own competence, or more to the point, their own incompetence. These business owners either didn't recognize or chose to ignore their own entrepreneurial shortcomings. These entrepreneurs also did not seek assistance from others who might have made up for their inadequacies. It's sometimes hard to ask for help when you are supposed to be the one with all the answers.
Believe me, I know.
The final contributing factor to the death of sixty-three percent of the businesses who died from bad management was that the owners had no relevant or applicable business experience.
Bad financial planning was the second reason sited by the survey as to why most businesses fail. In business, it's always about money. According to the U.S. Bank study, eighty-two percent of the business failures studied reported poor cash flow management as a contributing factor to the death of the business.
Seventy-nine percent of the businesses were inadequately funded, and seventy-seven percent miscalculated the cost of doing business. In other words, they failed to take into account all of the costs involved when setting the price for their products.
Let's move on to my favorite subject: bad marketing. You've heard me preach this sermon before. You can have the greatest product in the world, but if your marketing efforts are inadequate or ineffective you will end up with a warehouse full of the greatest product that no one in the world has ever heard of.
The study showed that bad marketing was a contributing factor in the death of sixty-four percent of the businesses surveyed. Many of these misguided entrepreneurs either minimized the importance of marketing and promotion or ignored it totally.
A vital part of marketing is knowing who your competition is and always knowing what they are up to. The entrepreneur who ignores his competition is a fool (gee, was that too harsh?) and is always destined to fail, as proven by the fifty-five percent of the dead businesses in the survey who either didn't even know who their competition was or simply chose to ignore the competition altogether.
Here's a nice hole in the sand for you, sir.
Please insert your head…
Another mistake made by forty-seven percent of the deceased businesses was that they relied on just one or two customers for the bulk of revenues. This is a common mistake made by many business owners who devote all their energy to one huge client. What they don't seem to understand is that if that one customer goes away, so does most of their revenue.
When performing your business autopsy you might identify other contributing factors that were beyond your control, such as a down economy, the lack of qualified employees, new government regulations that negatively affect the way you must do business, the failure of a strategic partner, etc..
There will always be things you can't control. The key to business success is to keep control of those things you can and do everything you can to prepare for those things you can't.
Next time we'll discuss a few things you should and should not do to help ensure your business success.
Here's to your success.
The Business Autopsy A Fact Of Life - To learn more about this author, visit Tim Knox's Website.
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Last week we discussed the importance of performing an autopsy on a dead business. No, I haven't been watching too many of those wonderfully graphic, TV forensic investigation shows. The reason I recommend you do a business autopsy is to uncover the exact reasons why the business died. This is valuable information that can not only heal feelings of personal failure, but also better prepare you for the pitfalls of business should you ever take the plunge again.
Starting a business is never easy and the odds of your success or failure are about even money. The fact is, approximately half of all small businesses fail within the first four years. And a large percentage of those failures occur within the first year. These are the statistics that keep many entrepreneurs awake at night. Like Sisyphus, always pushing that boulder to the top of the hill only to have it tumble back to the bottom each time, you never know when you're going to lose your grip on your business and have it tumble back over you.
OK, so far in this column I have managed to squeeze in references to modern American television and ancient Greek mythology. Enough highbrow beating around the bush. Perform the autopsy and learn from it. Only by knowing the real reasons your business died can you identify and hopefully stave off those maladies before they take you down next time, if there is a next time. And if you're a true entrepreneur there will be a next time, trust me on this.
There are many reasons why businesses fail, but according to a recent survey by U.S. Bank, the majority of business failures can be attributed to three reasons: bad management, bad financial planning, and bad marketing.
Bad management comes in many forms. The survey showed that seventy-eight percent of the business failures examined were due in part to the lack of a well-developed business plan and a business owner who had no business being in the business he was in. In other words, the business owner did not have an adequate knowledge or a thorough understanding of the business he had chosen to start. This is why software entrepreneurs like me don't start shoe stores. I have feet, I wear shoes. That's not enough to qualify me to go into the shoe business.
Next, seventy-three percent of the business failures in the survey were also manned by owners with rose colored calculators. These business owners over-estimated revenue projections (the number of expected sales) and under-estimated the burn rate (the amount of money required to sustain the business per month).
It gets better. Seventy percent of the failed businesses in the study were led by entrepreneurs who were in denial regarding their own competence, or more to the point, their own incompetence. These business owners either didn't recognize or chose to ignore their own entrepreneurial shortcomings. These entrepreneurs also did not seek assistance from others who might have made up for their inadequacies. It's sometimes hard to ask for help when you are supposed to be the one with all the answers.
Believe me, I know.
The final contributing factor to the death of sixty-three percent of the businesses who died from bad management was that the owners had no relevant or applicable business experience.
Bad financial planning was the second reason sited by the survey as to why most businesses fail. In business, it's always about money. According to the U.S. Bank study, eighty-two percent of the business failures studied reported poor cash flow management as a contributing factor to the death of the business.
Seventy-nine percent of the businesses were inadequately funded, and seventy-seven percent miscalculated the cost of doing business. In other words, they failed to take into account all of the costs involved when setting the price for their products.
Let's move on to my favorite subject: bad marketing. You've heard me preach this sermon before. You can have the greatest product in the world, but if your marketing efforts are inadequate or ineffective you will end up with a warehouse full of the greatest product that no one in the world has ever heard of.
The study showed that bad marketing was a contributing factor in the death of sixty-four percent of the businesses surveyed. Many of these misguided entrepreneurs either minimized the importance of marketing and promotion or ignored it totally.
A vital part of marketing is knowing who your competition is and always knowing what they are up to. The entrepreneur who ignores his competition is a fool (gee, was that too harsh?) and is always destined to fail, as proven by the fifty-five percent of the dead businesses in the survey who either didn't even know who their competition was or simply chose to ignore the competition altogether.
Here's a nice hole in the sand for you, sir.
Please insert your head…
Another mistake made by forty-seven percent of the deceased businesses was that they relied on just one or two customers for the bulk of revenues. This is a common mistake made by many business owners who devote all their energy to one huge client. What they don't seem to understand is that if that one customer goes away, so does most of their revenue.
When performing your business autopsy you might identify other contributing factors that were beyond your control, such as a down economy, the lack of qualified employees, new government regulations that negatively affect the way you must do business, the failure of a strategic partner, etc..
There will always be things you can't control. The key to business success is to keep control of those things you can and do everything you can to prepare for those things you can't.
Next time we'll discuss a few things you should and should not do to help ensure your business success.
Here's to your success.
The Business Autopsy A Fact Of Life - To learn more about this author, visit Tim Knox's Website.
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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