The staggering statistic of new businesses that fail within the first few years is a well trodden path of analysis and it wasn’t my intention to repeat the mistake of further over – analysis herein. But the interesting aspect of these failures is how many are caused, or contributed to, by entirely avoidable basic errors. During my career in business management and turn-round assistance I have encountered many times total incredulity accompanied by the question “what on earth possessed you to do that?”
So here is my magnificent 13-point guide to guaranteeing business failure. Of course if, perversely, you are determined to be successful, then you might choose to avoid all of the points of advice I set out below and do the exact opposite.
1. Plan for success
It’s always a good start to assume that sales and profit will quickly flow following start-up and that you need to plan for it. You need to have the entire infrastructure in place that will support the level of activity that will undoubtedly occur within the first year, whatever the costs. Don’t worry about the massive running costs and the high level of break-even sales you will need to achieve to pay for it; your business is bound to succeed and you need to plan accordingly.
2. You will need a smart office
Rent business accommodation to a high standard irrespective of costs and sign up for a long tied-in lease.
You will need plush offices with a reception service in a high-end technology park for your customers and trading partners to visit.
You can’t possibly entertain visitors in a low rent business park address that is little more than a converted farm outbuilding. And whatever you do, don’t try working from home, even if it’s justfor the first year; it may save a lot of money but it’s tacky.
3. There’s nothing worse than an uncomfortable office chair
Get an ergonomically designed, leather chair. Ok, it’s going to cost a thousand or so, whereas you could buy a cheap chair in Ikea or Staples for fifty, but your comfort is important. Who wants to work in an uncomfortable environment?
4. A boardroom table is a must
You will need a good boardroom table. A thousand or two should cover it.
5. Business cards and brochures
And you will need good quality stationary, business cards and brochures. Don’t economise on any of the trappings of success. It might be a substantial initial investment but you’re going to succeed -aren’t you?
6. Don’t waste time on a business plan.
You know what you’re about; you know what needs to be done so just get on with it.
Drawing up a basic profit and loss forecast with a cash flow and balance sheet profile is for the over-cautious; all it does is indicate cash problems before they get unmanageable and that will demoralise you.
In any case, you just don’t really need to keep focussed on cash flow since your undoubted success in achieving sales and income will cover all of your running costs eventually – won’t it?
7. Banks are your friend
Banks are very supportive, they are your friend and exceeding the overdraft agreement or running behind on a business loan repayment schedule will not overly bother them.
They will need to be placated occasionally but banks are understanding organisations that will always want to help you; liquidation of your assets to recover their money is something that they very rarely do. It’s a myth that the bank pulling the plug is one of the most common causes of business failure.
8. Borrow all you are likely to need and use your house as collateral.
Ok, it’s theoretically true that if you raise start-up capital using your house as collateral, you do run the risk of losing it if your business fails. Yes, that would mean that you, your wife and your seven children will be homeless but it probably won’t happen and anyway, you can always go and live with your in-laws and start all over again.
9. Employ a professional accounting service
Accounting is tricky stuff and it’s better to employ a professional accounting service, whatever the cost, rather than trying to manage with an inexpensive accounting package that claims to do the job perfectly adequately for a small business. Year-end accounts are difficult and, although it looks well within the capability of an averagely intelligent person, it’s complicated. As for PAYE and VAT don’t even think about doing this yourself.
10. Use consultants
Use consultants a lot – for marketing strategy, IT, advertising etc. Their expert consultants will come and ask you all about your business and your requirements then write it into a report and send it to you. They may charge daily rates that make you blanche, but the report will be beautifully presented and will use lots of word and phrases that are new to you – useful when you talk to customers.
11. Don’t try to set up your own internal computing network.
Get a firm in to do it for you.
12. Your business partner
If you are starting a business in partnership with a colleague. It doesn’t matter too much if you argue a lot. And you don’t really need a solid bond of trust between you. All that stuff about directors falling out being the biggest contributory cause of business failure might be true but it won’t happen in your case – will it?
13. Don’t work too hard
What do they have in common? Well, they all are basically lazy people who never devoted too much of their lives to their business ventures. They made sure that they always had plenty of time for the other things in life – golf, holidays, gardening, family etc.
Developing their business dream was never the dominant project in their lives. So follow that example; you shouldn’t need to spend too much time starting up a business. It really isn’t necessary to devote all of your energies to your business venture. Starting up a successful business is easy – that’s why everybody is doing it.
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