Okay, there’s a bit of sarcasim in that title but we needed to get your attention. No matter how big or small your company is, always keep your eye on these 10 things:
- Working capital – having enough working capital on hand or having easy access to working capital is critical. The need is even greater during slow economic times. For example, what will you do if your revenue drops by 50%? Or what if your major competitor’s revenues drop by 90% and they approach you about buying them out? Working capital solves these problems and turns them into opportunities.
- Inadequate accounting records – you need an accurate and timely picture on how the business is doing. Only complete and accurate financial statements can do that.
- Not controlling costs – always know what your costs are and don’t guess or assume they’re not changing. In other words, verify costs for each project you bid, proposal you submit, sales order you write.
- Not understanding your financial statements – your accountant (whether internal or extermal) is just like any other geek. They love to hear themselves talk and throw acronym after acronym out. If you’re really not sure what they’re talking about or aren’t clear how what they’re telling you helps you with points 2 and 3 above, call them on it.
- Not training your employees – you can’t do it all and if you don’t teach them, your employees can’t know how to do it (whatever “it” is). Also remember, buyers like businesses that can survive past the entreprenuer. Ask yourself how someone from the outside would view the business’ sustainability if you’re no longer involved.
- Failure to plan ahead – and for most small business this also means failure to plan. You need an understanding of where your headed to know how to motivate employees, gauge how well you’re doing and lining up adequate working captial.
- Weak internal controls – these are the policies and procedures you put in place to make sure employees don’t steal you blind. We’ve all read the stories about this happening “to someone else”. But are you really sure your controls would work if 2 employees got together and decided it was their time to earn the big dough?
- Not selling agressively – one of my favorite quotes is from the movie “Glenn Gary Glenn Ross”. When one of the sales people gets up for more coffee the sales manager sits him right back down with the stern line, “Coffee is for closers!”. Look at your sales by sales person. Most likely you’ll see that close to 80% of your revenue comes from 20% of your sales people. Clearly, some house cleaning is in order. But the next question should be “how can I get more people to perform like my top 3 producers?”
- Not carrying enough insurance – it’s a pity to see businesses go under because of insurable losses that weren’t. Don’t be one of “those” statistics. Insurance isn’t cheap but the alternative is . . .
- Not having professionals on your team – surround yourself with highly qualified and trust-worthy professionals. A good attorney, CPA, M&A Specialist, Insurance Agent, Banker, etc., are invaluable assets from many different perspectives.
Being the owner of a business is hard enough. Knowing what makes them fail most often will help you avoid it. But remember, it’s up to you to take action about the items on this list.