So, we’ve been talking about business folks, entrepreneurs,  products, wages, and business failures for the past few days.

Today, I thought I’d keep to how we prevent business failures.

First of all, there are some things that often prove insurmountable.  One of those calamities can be a fire- one where the entire business is burned to a crisp.  Even if you have adequate fire insurance (you DO, don’t you?), the loss of records, specialized machinery, and the like can be the death knell of your business.   This is another reason why having backups for everything- in a second, remote location is a great idea.

Or, you could be like one of the local coffee shops here in Alexandria.  When the crazed Illinois man attempted to kill our Congressfolks, the feds (FBI, US Capitol Police) and the locals (Alexandria Police) shut down the block for several days.  That kind of loss (note:  insurance companies would love to qualify this as a terrorist act, which absolves them from covering your liability) can make your recovery very tenuous.

Those are terrible things.  But, in reality, 2/3 of all new businesses make it to the second candle on their cake, but only ½ are around after 5 years- and only 1/3 last longer than a decade.   Given those odds, preparation is critical.

One of the biggest impediments to business survival is insufficient capital.  But, I can say with experience there’s always a shortage of capital- even at the big firms, which is why one picks the best choices for new products, the best way to handle issues, etc.  To ensure that there’s enough capital for those things that can help the company thrive.

Startup costs are often mis-guessed.  (Don’t tell me how scientifically you’ve derived them.  After my own dozen start-ups and my clients’ nearly 100, I can say we can form a safe range.  But it’s the little things that adjust the numbers- sometimes, too far.)  And, we all need to remember that we are a startup- even after we start generating revenue- sometimes, even after we began showing a profit. No matter what, we have to continually scan the environment for market shifts, calamities, new competitors, or even something we missed entirely in our preparation.

But, inadequate planning almost guarantees that capital will be short.  Because we need to have plans to handle as many contingencies as possible.  We need to know exactly what to do- so we can react quickly before a problem becomes a calamity.  It’s critical that our business model matches the situation in which we operate, that we know what is our unique value proposition, who (or what) are our target markets.  If we haven’t planned for contingencies and developed these answers, we are guaranteeing our failure- maybe not immediately, but certainly before we’ve survived that crucial half-decade.

Moreover, we need to continually train, to seek out the best potential staff members.  Because poor management also seals our fates.   Not keeping adequate financials means we’ll have no or little notice if things are not going according to plan- or even if we’ve hit an obstacle that needs surmounting.  If we’ve failed to develop and/or maintain business structure (even reporting mechanisms), then our staff (and ourselves) are pretty much going to be befuddled and ineffective.  Even worse- there can be power struggles, since there is no clear chain of command or operational control.

And, then we come to the biggest problem.  Our personalities.  Too many of us have no clue what we don’t know.  Moreover, too many of us don’t bother trying to discern what we don’t know, thinking we know it all!  (I’ve stated many times the only good thing I can recall about former Vice President Dick Cheney was this aphorism:   We know the known knowns; these are the things that we know.  We also know there are known unknowns; these the things we know we don’t know.  But, there are also unknown unknowns; the things we don’t know we don’t know. We need to minimize the unknown unknowns.)

Cocky entrepreneurs plow ahead despite the fact that the unknown unknowns are overpowering- or they don’t really know those things they think they know.  We work really hard with our clients to ensure this is not one of their issues.  It’s critical to ask questions about everything and develop answers; we need to to stay aware.

Some entrepreneurs are so desperate to not have a boss that they pick a business idea from a list or the internet (which is replete with alternative facts).  The problem is that passion is lacking.  That passion, along with knowledge of their business sector means they will have that little extra to deal with the problems when they appear to be insurmountable.

Or, when the entrepreneur has to do something necessary that would be drudgery without the passion to succeed in the venture.   Many management issues simply suck- but they still need to be completed- and be done well.

There are some things that can’t be taught- entrepreneurs have to be leaders; they must inspire their staff.  They need to dazzle and fascinate customers.  They also will have to engage with other businesses and folks in their environment.  Without being gregarious, this is a tough order to fill.  (It’s also why many businesses have partners- to ensure that someone has this capability.)

Entrepreneurs also have to be creative, to be innovative.   They need to see what’s out there- to seize opportunities that arise with market changes, to try new approaches for operations.  Because by being innovative, our businesses can grow and adapt, to survive that decade and beyond.

Like we want!