There are a lot of reasons why a business can fail that are outside of your control. These range from changing economies, business partners, natural disasters, and more. However, many businesses fail because of problems that could have been completely avoided. Being able to prevent the following five will most certainly increase your odds of making it in the long run.
1. Avoid Partners/Shareholders
It is very common for a business to start between two or more parties. These partnerships often look ideal on paper. Maybe your partner has complimentary skills, access to capital, or a unique skill set. STOP! Don’t take on a partner or shareholder. While tempting, most partnerships fail. Dave Ramsey, one of the foremost voices in the small business space, will tell you that the only ship that won’t sail is a partnership, and he’s correct. The only exception to partnerships is in law firms. Due to how the firms are formed can make it easy to dissolve the partnership when needed, but in most businesses, partnerships can be a disaster.
Consider that when you take on a business partner you get all of their great assets as well as their current and potential issues. Partnerships dissolve because we are all going in different directions. Animosity can also develop if one party works more than the other, needs to take a distribution, wants to take on debt, needs to step back. etc.. The issues I could point out here are near endless.
The solution is to not have a legal partner, but give an individual responsibility over a part of the business and make them responsible for the P&L of that unit. You can even compensate them based on their performance. That person can rise and fall with the ebbs and flows of the business without you giving up control. If you or the individual ever needs to change direction you will have the security of not losing part or all of your business.
The key is to structure your business with you as the sole owner, but give your team the ability to grow their income and run parts of the business, without legal ownership.
Probably the most avoidable is laziness, a disease that can become your way of life. Laziness creeps into us slowly but can gradually take over, like a cancer. It spreads into all areas of your life. If you are lazy then your business will reflect as much. Not putting in the work will cause you to go out of business.
Never let your competitor outwork you. Whether you are running a retail operation, service business, or construction company you can always outwork the competition. This is where being a small business can work in your favor. Your larger competitors take forever to make decisions. They are slow to change direction (Blockbuster vs. Netflix). And they are full of lazy people.
My wife and I used to be regulars at a restaurant in the area. However, slowly the standards started to fall. They let the bathrooms go uncleaned. The food was not as good. The tables were sticky. One by one the issues built up, resulting in us making the decision to stop going. That is revenue they will never get back and it was completely avoidable.
How do you prevent laziness? One day at a time. Get up early, get the BS out of the way, and get to work each day. Be aware of what is happening inside of the company, what needs to change, and focus on the details. Some days you will have to force yourself to do it. But I promise you those days will be less frequent and you will realize the results. Save the laziness for vacation days, not every day.
3. Lack of Standards
As every business grows you will inevitably add employees. When you start, the process is slow and you add one by one, however, eventually you will have to assemble a team. Once you have people doing all of the jobs you used to do, this is where you can fail. What got you here won’t get you there.
If you do not develop and maintain standards your business will surely suffer. You, as the owner, have a vision for the company. You have to make sure that vision is carried out. While you should solicit feedback from your team, you ultimately have to have standards in place.
Hold your team accountable for every standard. Make sure your vision is being carried out and don’t allow for it to falter.
4. Being Unprepared
Have you ever been in a meeting with a sales person who was completely unprepared? I have and it is painful. A salesperson gets an opportunity to sell to a customer after having gotten a meeting, and when it is time to close, the salesperson is not ready.
I once had a sales manager who was charged with growing revenues. She had worked to get in deeper with a client and was successful, the client asked us to take on a large project. All the manager had to do was send the contract by a certain date. However, she delayed, delayed, and delayed to the point that the clients budget year rolled over and bang, no deal was possible. They went with someone else. It took over three years to get back on that clients’ budget radar due to purchase cycles. All of this was because she was not prepared to close a deal.
To this day, it makes me cringe to think about how that experience played out. Being unprepared is completely avoidable. If you are building a business you should be putting in the work to be ready. There will always be times when a client is in a rush or has a short buying cycle. So, you better have prepared the backend process before that day comes. Don’t stall because you can’t get a quote out. In my company you should be able to get a client a quote or a contract in hours, not days. We work in competitive spaces and we do not have the luxury to take our time.
Put in the work to be prepared. It may be nights and nights of work but the work will pay off. That work will be repeatable and pay you dividends for years to come.
5. Lack of Execution
A good idea is only a good idea because you test it out. Without really acting upon it, then it is really just a theory. Maybe you want to workout at a gym, it only counts if you actually go to the gym and execute the idea.
So many people have amazing ideas that just die without ever being tested. You can change that by executing! Be someone who can move an idea along from concept to reality. Maybe it will fail. Maybe it will be a hit. Maybe you will learn something along the way that will adjust the idea.
My biggest business right now is not the original thought, it is an evolution of the original thought. I started, grew the idea, matured it, listened to market forces, and developed it along. It all started with me executing on the idea to begin with! You have to start somewhere.
Not starting or starting is what makes the difference. Not trying it out separates the quarterbacks from the armchair quarterbacks. If you have an idea get to the point to where you can execute on that idea.
That isn’t to say all ideas are good. Some are bad. But you will never know whether to push forward or kill it until you execute on the process.