Friday, October 26, 2012

Business Failures – Why do they happen?

Poor management is the largest single cause of business failure.

Year after year, the lack of managerial experience and aptitude has accounted for more than 90 percent of all failures.

Many factors may adversely affect individual firms over which owners have little control. In such cases, the astute manager can often soften the blow or, sometimes, change adversity into an asset. Examples of factors over which the owner has little control are overall poor business conditions, relocation of highways, sudden style changes, the replacement of existing products by new ones, and local labor situations. While these factors may cause some businesses to close, they may represent opportunities for others. A local market place may decline in importance at the same time new shopping centers are developing. Sudden changes in style or the replacement of existing products may bring trouble to certain businesses but open doors for new ones. Adverse employment situations in some areas may be offset by favorable situations in others. Ingenuity in taking advantage of changing consumer desires and technological improvements will always be rewarded.

In the final analysis, it is up to you. Will your management be competent? Will you be able to judge, and then satisfy, your customers' wants? Can you do this accurately and quickly enough to more than compensate for risks due to factors beyond your control? Such accomplishment requires expert management - if you can’t supply, it consult with and hire people who can!

Every year, thousands of businesses fail of every size and variety. But while business failures know no size boundaries, the majority are classified as small businesses.

According to data from the Administrative Office of the U.S. Courts, more than 98 percent of businesses that have filed for bankruptcy since 1980 have been small.

Surveys show that the primary reasons for business failure lie in the following areas:
Inability of management to reach decisions and act on them.
Failure to keep pace with management system.
Reluctance/Inability to seek professional assistance.
Loss of impetus in sales.
Bad personnel relations.
Loss of key personnel.
Lack of staff training.
Inability to cope adequately with competition.
Insufficient working capital or incorrect gearing of capital borrowings.
Growth without adequate capitalization.
Bad budgeting.
Ignoring data on the business's financial position.
Inadequate financial records.
Inefficient control over costs and quality of product.
Under-pricing of goods sold.
Bad customer relations.
Failure to promote and maintain a favorable public image.
Bad relations with suppliers.
Illness of key personnel.
Failure to minimize taxation through tax planning.
Inadequate insurance.
Competition disregarded due to complacency.
Failure to anticipate market trends.
Loose control of liquid assets.
Extending too much credit and bad credit control.
Over-borrowing or using too much credit.
Bad control over receivables.
Loss of control through creditors' demands.

Friday, October 19, 2012

The High Cost of Telephone Interruptions

One of the most difficult aspects of a small business is that customers call [OR STOP IN] constantly and expect you to be instantly accessible. Once they reach you, they expect you to drop everything to deal with their matters. Most business people, feeling they are obliged to respond to their customers, divert themselves from the tasks at hand and acquiesce to the customers' wishes. By the end of the day, you may have had 10 customer calls and have been diverted 10 times from the important matter on which you intended to work. You now have 10 files open on your desk, on each of which you have spent about 15 minutes. It is difficult to create any continuity of thought working this way.

It is estimated that for each interruption you have you lose 2 to 3 minutes of productivity on the matter from which you were diverted. Each time you return from an interruption you must take some time to reintegrate your mind with the original task. You have to answer the question, "Now, where was I?" If you have 10 interruptions a day, you spend 20-30 minutes a day answering that question. This translates to 80 to 120 hours a year in lost time and revenues just trying to find your place.

There is also the issue of your work product. Every business requires analysis, assimilation, problem solving and creativity. The more continuity you have in your thought processes, the better your work product will be. The more pushed you are for time, the more shortcuts you will be forced to take. Therefore, constant interruptions not only cost you time, but quality.

The key to producing more productive work is to understand the difference between accessibility and responsiveness.

Accessibility means the businessperson can be reached whenever the customer wants him/her. Though this is a great comfort and convenience to the customer, it is disruptive for the businessperson. Ultimately it is detrimental to the customer because it will cause the customer's work to take longer and the sum total of the interruptions will erode the integrity of the work product.

Responsiveness means the customer can depend on having a conversation with you in a reasonable period from the time from their call. It means you return calls promptly. Ironically, businesspeople that are highly accessible are often not very responsive. The result of being accessible is that they get so far behind, they don't have time to return calls. This exacerbates the problem because customers learn that the only way to get through to you is to call relentlessly, leading to more interruptions, more delays, etc.

To increase your productivity, you should limit your accessibility and be fastidious in your responsiveness. Contrary to popular belief, though customers want you to be instantly accessible, most do not expect that you will be. They do expect you will respond within a reasonable period of time. That period is within 24 hours (or the same day if possible).

If you have a pager or cell phone, NEVER give the numbers to customers. Your staff are the only people who should have the numbers. If you give the numbers to a customer, that customer will take it as a license to contact you any time he/she pleases (including 4:00 am on a Saturday morning) and will be indignant if you don't answer or return the call within 3 minutes. From the customer's perspective, if you don't answer or call immediately, you are obviously ignoring them, which is a brazen insult. Though it seems like the ultimate in attentive service, giving customers your pager or cell phone number is almost guaranteed to inflame customer relations and cost you your sanity. You may as well just reserve your room at the asylum now.

Sunday, October 14, 2012

Common Problems Affecting Personal Productivity

In a large sense, the freedom that attracted the businessperson to the small business environment becomes a major contributor to the productivity challenge. The point of having sought that freedom was to escape the oppressive structure of larger environments. Unfortunately, when the pendulum swings too far in the other direction, the result can be chaos.
Being in a small business exposes a businessperson to a lot more details to be handled in various areas not previously experienced nor anticipated. If your previous life consisted of coming to work, working on specific matters given to you, keeping track of your hours and going home, running your own business is often a real shock.
The first thing that often happens to businesspeople is they get overwhelmed by minutiae. Life becomes one annoying little problem after another with no one to handle them but them.
In addition, there are more little distractions, especially non-”selling” phone calls from friends, family and others, with whom you would not think of having protracted conversations if someone were monitoring your time. Distractions you might have allowed five minutes while you were in a large company suddenly become 30 to 40 minute adventures.
Then there is your computer. Computers have a special magic feature that makes them periodically malfunction, or worse still, function perfectly and give you something completely different from what you wanted. The real sorcery occurs when you attempt to fix the problem. Large blocks of time mysteriously vanish. You start working on the problem at 8:30 AM and when you look up from your monitor fifteen minutes later, it is somehow 10:27 PM.
Learn to prioritize and organize and you WILL overcome this!
 "That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise." - Abraham Lincoln

Wednesday, October 10, 2012

Ask People Why They Do Business With You

Testimonials are great, but successful companies do something more direct.

How often have you actually asked a person why they do business with you, and not your competition?

Have you ever?

Most people don't bring up the subject. They're afraid that the customer might start thinking about whether or not they should switch. Believe it that's not at all likely, unless they were on the verge of switching already. In that case, you'll find out now, when you have a chance to fix it, instead of later, after they're gone.

When the customer hears a sincere question from you that you genuinely want an answer for, you'll be surprised at how often you'll GET a direct answer. And you'll be surprised at some of the things you hear.

What you consider important might not be at all what the customer thinks matters. Ask them with a genuine interest (You DO want to know why people spend money with you, don't you?) and then listen. Ask for specifics. And when they've answered you, thank them.

When you see a pattern forming, use that in your advertising. Look for the things that are common to your most valued customers. Build on those strengths.

You'll also notice that, when your customers tell you out loud why they buy from you, they're also telling themselves. They reinforce the reasons that you are the one that they do business with. And that's the best advertising you can get.

Wednesday, October 3, 2012

Be a Leader People Want to Follow

There is a real need for leaders to lose the pretense and posturing that is so common today in people with power. From government to industry, congressmen with ethics issues and heads of major corporations mishandling their roles, leaders seem to hold themselves to different standards then they hold those who they lead and represent. They foolishly live by… “do as I say, not as I do.”

Some of the greatest and most loved leaders of all times have been ‘just plain folks’ who were approachable, genuine, real, and down to earth. People want leaders that they can believe, relate to and who they know relate and care about them. It’s all about the people.

Sadly, the higher up in the leadership of anything the easier it becomes to become isolated and lose touch with the people who you are responsible for…. The people who depend on you and who you, in the end, depend on also.

By remaining humble and authentic anyone can face the challenges of leading effectively.

Prepared by the OED Content Committee

Monday, October 1, 2012

Major Business Money Myths

There is no mystery to financial success ... it is only a matter of mind over money!

Myth: "If only we had more money coming in, everything would work out."
Reality: More income (sales) does not necessarily change the bottom line. More money coming in is usually matched by more money going out. This is because most businesses are "programmed" for a certain relationship between income and outflow. The chain must be broken ... discipline must be put in place so that profit is made at the level of revenues at the present time!

Myth: "Financial success ... well being is defined by how much money the company earns."
Reality: Financial success is really about how much a business keeps of what it "earns" not how much it earns. To build "wealth", a company must consistently earn more than it spends. Profit! Profit! Profit!..... Profit!

Myth: "In an inflationary economy, using credit ... borrowing .. is wise because it allows the company to buy what it needs (wants) and pay it off later ... when money will be worth less."
Realty: Debt is bondage and in most cases should be avoided whenever possible.

Myth: "Once in debt, it is almost impossible to get out."
Reality: Debt can be learned from and reversed. The first step is to alter the behavior that created the debt. The second is to work out a plan with the debtors to work it down.

Myth: "If the economy were better, we'd make more money."
Realty: Putting the blame outside the company does nothing to solve the company's money problems. Some company is "getting the work" ... how do you insure that it is your company?

Myth: "Money is the root of all evil."
Reality: In business ... money .. profit .. is the only reason to exist. The profit the company makes allows the owners, the employees, the vendors, and the customers to contribute more to the economy and their individual life styles ... quality of life. Without PROFIT there is no employment or growth!

(Created by the Organization for Entreprenurial Content Staff)