5 Reasons Businesses Fail
I did a podcast at The Catholic CEO’s business center in Sugar Land, Texas. Laura Fisher, the interviewer, and her husband run a great place (www.imperialbusinessparks.com). You can find the interview there. She asked me how businesses fail.
There was a dark, brooding sky, torrential rain, flashing lightning all around us, and loud crashing thunder during the interview. It kind of set the mood. Our headphones were crackling with noise. We pressed on.
1. Run Out of Cash.
Sounds simple right? But the point I was making is that businesses that fail almost unanimously tell you that they didn’t realize they were running out of cash.
SOLUTION: Monitor your cash every week.
Forecast next week’s expenditure needs, including payroll. Take quick action to boost collections or sales. Think on a weekly basis. This means you can’t randomly look at your financial statements six or eight weeks later. Get data weekly.
2. Miss signals.
How do you get signals? SOLUTION: You create a weekly dashboard of the most important indicators for your business. You measure them. You report them. And, you interpret the data. You don’t just report it. Think visual aids like red, yellow, and green coding or line graphs and bar charts. Take the time to build these tools. Select three to five and learn to understand their every twitch.
-3. Forget about markets and customers. How can you forget? Easy. You get
-3. Forget about markets and customers. How can you forget? Easy. You get into a groove or rut. You start expecting the revenue flow to continue without change. But maybe a competitor has a better product. Maybe your pricing is insensitive. Maybe your service has slipped. Maybe you’re mailing it in.
SOLUTION: Constantly do customer discovery. Constantly test the merits of
your product or service. Do short, sharp pricing tests.
4. Let the Team Fall Apart.
Years ago, and still true today, The Kaufmann Foundation wrote a report on all the factors that contribute to valuation. The
most important factor that contributed to business valuation? The team. The people. The business plan, the technology, and even the size of the market are all secondary to the team. Why? The team can respond to conditions that emerge (see black swan events) when the unexpected surprise hits.
SOLUTION: Pay attention to the “Big 8 Teamwork Traps”. Contact us and we’ll send you my free published article.
5. The Abilene Paradox.
Check it out. The Abilene Paradox is that situation that arises when nobody speaks up. The story is that of a family sitting on the porch on a hot Sunday afternoon in Kansas. One of them says: “Let’s go to Abilene for ice cream.” Another one says: “Nah. Too hot and dusty.” But another one says: “Well, maybe it would be good. Nice delicious ice cream?” Yet another says: “But it’s so hot!” Fast-forward and you see that they indeed went to Abilene. Now it’s sunset and they are back on the porch. One says: “You know, I never really wanted to go to Abilene.” Another says: “But I thought you wanted to go, and that’s why I agreed to go!” Still, another says: “Me too. I thought you all wanted to go and so I agreed to go – but I didn’t really want to go either.” As you can see from the story, they all made assumptions about what the other was thinking.
SOLUTION: Check to make sure everyone is heard. And check for the truth, not for an assumption transmitted by silence or silent assent. Check for the real opinion.
God bless you, your family, and your works. You can be Catholic and successful in business. Believe it.
The Catholic CEO
Henry Kutarna
