There are only 3 real reasons why your business could fail. With so few reasons, why are liquidators doing so well at the moment? As an accountant and business consultant I’m right at the coal-face so I thought I’d share my recent observations so that you can assess your own business objectively against the criteria and avoid any unnecessary pain.
I often have entrepreneurs coming to me with exciting new ideas. But it’s my job to take the emotion out and look at the model objectively. It’s not enough to be innovative and to identify an unsatisfied need in the marketplace. You need to be able to satisfy that need in a consistent, profitable and scalable way. The business model is both the economics and mechanics of your business. Just because you have a product that people will pay for does not mean you have a good business model. The business model deals with everything from the market identification through to purchasing, resourcing, distribution, logistics, cashflow management and much, much more.
#1 Reason – The Business Model Doesn’t Work
I often have entrepreneurs coming to me with exciting new ideas. But it’s my job to take the emotion out and look at the model objectively. It’s not enough to be innovative and to identify an unsatisfied need in the marketplace. You need to be able to satisfy that need in a consistent, profitable and scalable way. The business model is both the economics and mechanics of your business. Just because you have a product that people will pay for does not mean you have a good business model. The business model deals with everything from the market identification through to purchasing, resourcing, distribution, logistics, cashflow management and much, much more.
Does your business model work? Do you revisit and innovate the model as the marketplace and technologies evolve? Failing businesses don’t!
#2 Reason – Failing to Create Realistic Plans and Budgets
Assuming you’ve got a business model that can work, it’s time to identify the specific activities, tasks and milestones to make that model run effectively. I see too many entrepreneurs get ahead of themselves and go straight into the marketing function without yet planning for scalable sourcing and distribution. The other key failure is not calculating and understanding what the break-even point and working capital requirements will be. A true entrepreneur never runs a business from the seat of their pants, instead they diligently move resources from areas of low yield to areas of high yield. Doesn’t sound as romantic, but do you want to stay in business or not?
Do you have an action plan that you implement? Do you know what your break-even point is? Do you understand your own working capital cycle? Failing businesses don’t!
#3 Reason – Lack of Implementation of Important Things
Hopefully your business model works and you’ve created specific action plans and budgets to carry it all out seamlessly. It’s time to roll up your sleaves and get down to business. Notice I said “Business” and not “Busy-ness”. I see too many entrepreneurs make great plans, but fall short at implementation because they are easily distracted or find excuses not to go outside their comfort zone. So they end up spending time and money on things that aren’t part of the plan and add no value to their business. I’m not trying to be funny when I say that business really is as easy as consistently doing the right things right.
Are you consistently doing the right things right? Are you going outside your comfort zone? Do you keep yourself accountable? Failing businesses don’t!
Have you achieved anything big so far today? What single major task can you tick off before you go home tonight that will make all the difference? Are you doing the right things right?