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Bill McCready
Business Survival Strategies:
How To Spot Trouble Signs And What To Do About Them.
All too often, the perceived need for business expansion capital
is really a need to become more efficient, tightening
management, using resources already available, and increasing
marketing efforts.
According to Corporate Economist Philip B. Nelson, there are 13
"Bad Luck" causes directly attributable to management that cause
businesses (and government) to get into financial trouble.
Awareness of these pitfalls can help you avoid them.
Errors of omission (i.e. lack of foresight, anticipation or
experience)
1. Lack of planning to cover increasing debt or interest rates
23.3%
2. Changes in the market place (nothing stays the same)
66.6%
3. Technological changes to the market that bypass your
company 13.3%
4. Changes in the physical environment (often occurs slowly)
3.3%
5. Disruption of key relationships (loss of key clients,
financing, etc.) 36.6%
Errors of Commission (yes, it's a "do it to yourself project")
1. Over expansion (too many government employees, offices,
products) 66.6%
2. Over leverage (works great during expansions, remember the
"bubble") 53.3%
3. Over diversification (what business are you really in and
what makes the money?) 40.4%
4. Over dependence on one customer, supplier, product, etc.
who suddenly disappears or changes the relationship 13.3%
5. Inadequate control systems (does your accounting,
manufacturing, etc. system give you the answers you need right
now?) 80.0%
6. Dissension among the management team (it is a team isn't
it?) 40.0%
7. Has the business reached its "level of incompetence"?
46.7%
8. Lack of leadership by the chief executive. One of my
favorite books is titled "If I'm in Charge, Why is Everyone
Laughing?" 83.3%
Solutions and Control Systems
If you have identified the problem (as that great American
philosopher Pogo put it "We have met the enemy and he is us!")
what's the best way to solve them?
+ Avoid denial of the problems.
+ The best hope for an early and successful recovery is
willingness to recognize symptoms of a sick company, and take
action.
+ Don't fall for "escape hatches" and last minute "saviors".
+ Be willing to put the survival of the business above
personal agendas and competing issues.
+ Get professional help early and often. This author recently
helped a client convert over $3 million in debt to equity, and
then refinance the one remaining loan in the company's debt
portfolio.
+ Do everything possible to control all costs? Can you
automate, use part-time help, re-negotiate rents, restructure
responsibilities, out-source production, etc.?
+ Discover ways that to use current assets (both people and
tools of the trade) in a more efficient manner.
+ Explore ways to increase sales. Is there enough margin to
allow expansion of your sales efforts? Many companies make the
mistake of cutting sales commissions and incentives during tough
times when just the opposite is called for.
+ Measure the effectiveness of your advertising. Does your
advertising follow your marketing plan? Are advertising dollars
quantifiable?
+ Know "when to hold 'em and when to fold 'em".
Self Monitoring the Company Vision
One of the biggest reasons fail is lack of a business plan or
not keeping the business plan current. Another is the "head in
the sand" approach that is often caused by being too busy to
plan.
Communication and buy-in by all company employees, officers and
directors of the vision and plan for the business will help
stabilize your company. We suggest weekly meetings until you
grow beyond 50 employees.
Another excellent use of a small amount of capital is to have an
independent, non-financial audit of the company personnel to see
just how well your communication system is functioning. In our
Seven Venture Capital Reports, we provide just such a Business
Fitness Quiz for self evaluation.
Venture Planning Associates, Inc., http://www.ventureplan.com
Tel. 858.457.3434 / efax 425-955-7531
capital@ventureplan.com
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