Is Your Business On The Brink Of Disaster?

November 14, 2008


Is your business on the brink of disaster? If so, don’t wait for a business disaster to happen. Check to see if your business is making one of these crucial mistakes and fix the problem fast.

Last night I had a dream. Actually, it was a nightmare. I wound up in the middle of a huge business disaster. I’d taken a job at Disasters R Us - the most inefficient business I’d worked in, since the NHS. And aside from showing me how much I’d hate to work for someone else; it also reminded me how small problems can escalate into a huge business disaster, if you don’t fix them.

Technology That Sucks Money From Your Business

Disasters R Us was ran by two partners. I think they were brothers, so we’ll call them Cain and Abel. Abel seemed to spend most of his day trying to fix three dodgy printers. And Cain disappeared so often that I initially thought the bathroom was his office.

The time wasted in this business was astounding. Three more women worked in the office, aside from me. But they spent most of their time talking, because they couldn’t work while the printers were broken. I had trouble figuring that one - I guess Cain and Abel were a bit gullible.

Most of my day at Disasters R Us was spent typing piles of letters. They looked perfect until I came to fold them. The business used some cheapo ink which dried slowly, so the print smudged.

When it comes to materials, you want to save money. But using low quality products that don’t do the job properly, is just a massive waste. And replacing technology that sucks can be expensive. But if it’s wasting your time, it’s losing money. And if it’s wasting the time of your staff on a regular basis, your business is probably leaking so much cash that business disaster is imminent.


Business Partnerships Often Lead To Disaster

As I said, two brothers ran Disasters R Us. And while Cain appeared to be doing bugger all, Abel ran round like a demented chicken, fixing the printers and doing meaningless tasks, like unblocking the toilet and making everyone sandwiches at lunchtime.

Halfway through the day, Cain disappeared altogether - he had a headache. This wasn’t surprising. Disasters R Us was one huge headache.

Before you enter a business partnership, ask yourself if you really need a partner and what value they will bring to the business. If you’re already in a partnership with someone who’s as much use to your business as a dinghy with a puncture, make arrangements for one of you to leave, as soon as possible. And if you’re worried about falling out with your partner, remember that the fall out will be much worse if you wait until your business finds itself in the middle of a huge disaster.

Also, realise you can’t run a business efficiently, if you’re spending most of your time doing meaningless tasks and fixing broken equipment.


Expensive Business Premises And Overstaffing Could Lead To A Massive Disaster

Disasters R Us wasn’t the type of business where customers visited the premises. Yet they had a ridiculously expensive town centre building. And because they were so unorganised, the business was paying folk to sit round talking all day.

Expensive business premises won’t add value to your customers experience - especially if they don’t see them. And even if they do, they might wonder how much you’re ripping them off to pay for overpriced office space.

Also, if you don’t have a system in place and your business is like an episode of Fawlty Towers, simply throwing more staff at the problem will lead to a huge disaster.

Last year, I interviewed Ian Denny. His small business met with disaster, when it went from £1 million a year in sales, to bust. One of the reasons for his business disaster, was not having a decent system in place and taking on more staff, instead of trying to fix the problem.

He started the business up again, put a good system in place and they were able to do the same amount of work efficiently, with far fewer staff.


Unneccessary Paperwork

On my first day at work for Disasters R Us, my boss gave me two filing trays full of letters to respond to. Some of the letters appeared to be weeks old and I had to wonder if it really was necessary to reply to most of them.

Does your business spend a lot of time doing unnecessary paperwork? Does every letter that comes into your office really need a response?

Too much time spent on trivial things, instead of activities which will make your business money, could eventually lead to a huge business disaster.

Have you ever worked at a place like Disasters R Us? Are they still in business? What other business disasters should we be trying to prevent?



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Deciding When To Wind Up A Business

October 2, 2008


Deciding whether you should wind up your business isn’t easy. I’ve had to make the decision to wind up a business myself and I learned a lot from the experience. And if you’re faced with that decision, I hope these guidelines will help.


Do You Have A Choice?

Much of the time, if a business is performing badly, the decision to sort the problem out, or wind up the business will still be in your hands, if you tackle the problem quickly. And this is a good thing, because it means you are in control of the outcome.

That feeling of control is important if you decide to wind up a business. I think when some folk talk of failing, after winding up a business, it’s often because they felt helpless, as they were no longer in control. And that’s a shame, because it can put them off trying again.

If you are still in a position of control, ask yourself the following questions:


Is The Story Still The Same As It Was When You Started This Business?

Are you still passionate about this business?
Is there still a demand for what you’re selling?
Is your industry being affected by an economic downturn? What can you do about it?
Do you have enough cash to keep growing the business?
What other problems does the business have and how can they be resolved?

Are You Still Passionate, Or Were You Ever Passionate About This Business?

The passion factor has been much debated. You certainly don’t need to be passionate about the technical aspects of your business but it does help if you’re interested in learning more about your industry. The business I wound up was a plumbing business. Now I’m not a plumber and I never intended to become one. But that didn’t matter.

I was passionate about my vision of what a plumbing business could be like. Trouble was, my vision was a lot different to the way the industry is now, so I was met with a lot of resistance, not from customers but from the people I employed. They liked things the way they were and I thought the industry sucked.

To overcome that resistance, we knew we’d have to train people from scratch and because of the financial position the business was in, I couldn’t see it happening for a couple of years. So I decided I’d rather be doing something I was passionate about now.

* You don’t always have to make money back the same way you lost it. A lot of folk make that mistake. If you’ve lost cash in a business and you’re not passionate about that business, you’ll probably find it’s easier to make it back if you do something you love to do.


Is There Still A Demand For What You’re Selling?

Did you research the demand for what you’re selling? Does that demand still exist? Often, demand can decrease if the economy is in trouble. And sometimes, new technology can make what you’re offering redundant.

The construction industry was hit hard in our area. Bigger, better established plumbing businesses began to go bust and many builders stopped building. Also, people just weren’t spending money on things like new bathroom suites.

Now an economic downturn doesn’t necessarily mean you’ve got to wind up your business - especially if you’re still passionate about it. For a start - you could diversify - if you can afford to.

Can You Afford To Diversify?

Consider what will it cost you financially to diversify and whether you have the necessary skills or experience. You have to be brutally honest with yourself when you’re doing this and consider the downside.

For example - we had the chance of two large contracts. We could have made a huge profit if we’d gone ahead with them. But after a lot of consideration and getting outside opinion, we turned them down because we didn’t have the knowledge and experience to do the type of work we were offered. Plus, we’d have needed to borrow in excess of £100,000 personally. For me, the potential downside far outweighed the possible gain.

*If you find yourself in a similar position - work out what you could lose if things went wrong and decide whether your business could stand that risk. Business isn’t about taking foolish risks, you’ve got to measure each one carefully.


Do You Have Enough Cash To Keep Going?

Do you have enough cash to keep the business running, if there’s a decline in trade? Are you being realistic? Sometimes having enough work coming in isn’t enough and you need to allow for unexpected hitches.

In our case, I figured that we’d have enough cash to keep going for a year but we really struggled towards the end and I wound up having to sell personal items. It was partly due to problems I hadn’t anticipated.

For example, we overestimated the experience of a couple of people we took on. They didn’t get the work done in time and because we charged per job, rather than by the hour, we started losing money on the work we were doing.

Also I was relying on money I was owed from a business I’d already sold and I didn’t get paid. I still haven’t been pid but now I’ll make sure I do. And you can bet that the person who stood in the way of me getting my cash will be truly sorry.

*If you sell a business - make sure you collect in all your cash before you start another one, as you may not have time later. Also, if things start going wrong in the early days of your business, do something about it as soon as you can, instead of hoping things will improve.

Small Problems Are Different

Businesses will have small problems all the time. And so long as you can find a solution to them - and your business story hasn’t changed, you should be able to ride them out, so long as you don’t have too many at once. Things like short term cash flow problems, staffing issues, theft, damage to business premises, short term shortage of work etc can all be overcome. But it may be more difficult if you have several problems at once.

Business Problems I Haven’t Mentioned

There’s many problems you may face that I haven’t mentioned. Things like ill health, loss of business premises, partnership problems, or even the death of a partner could cause problems in your business. But you can make a contingency plan to enable you to deal with these type of problem if they arise.

If you’re considering winding up a business, I hope these guidelines have helped. Can you think of any additional problems that might cause you to wind up a business? Do you have any questions?

I wrote this article in response to a question from Avani Mehta. Avani has written an excellent anger management series and you can check out part 1 here: Decoding Anger: Anger Management Series Part 1.

Image by Kenneth Lu

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Don’t Add This Poison To Your Business Cocktail

September 26, 2008


I was sitting here feeling a bit sorry for myself yesterday. I’m choked up with the cold bug from hell. I always get cold or flu around this time of year, when there’s lots of bugs around. It’s the only time I wish it would freeze and kill the little buggers. And my husband - Stuart is away for a few days, so I miss him. I hate having to make my own coffee.

Anyway, I was feeling kind of sad because Stuart and I have decided not to work together anymore, after five years of doing so. First, Stuart worked for me, in my fire and flood restoration business - that is how we met, then we ran another business together.

It’s a smart move - we both have different things we want to do., I shouldn’t have been feeling sad - because I don’t normally throw that lethal poison into my business decisions: emotion. And you shouldn’t either.

Emotion Poisons Your Decisions

Many people do make decisions based on emotion. And plenty of advertisers are aware of that, which is why so many people are up to their eyeballs in debt. But if you allow emotion to influence major business decisions, instead of relying on your head and your gut instinct, you could wind up in serious trouble.

Becoming Too Attached To Your Business Can Prevent You From Moving On

When I sold my fire and flood restoration business, Stuart left at the same time as I did. He admitted feeling sad, on that last day. But I didn’t even allow myself to think about feeling that way. I did love my business - we provided a great service to our customers and I really enjoyed my work.

But I had good reasons for selling. Some real chauvinistic assholes were deliberately making my life difficult (it was a franchise) and I was also tired of getting paid late and in some cases, not getting paid at all. Plus, I’d been planning to sell a couple of years down the line, as I wanted to do something on my own. So for me, it was the right move. Once you’ve made a positive decision to sell a business, you should never allow emotion to cloud it, or you’ll find it impossible to move on.

*If you find you’re feeling emotional when it comes to selling a business, ask yourself if your reasons for selling have changed. If they haven’t, be satisfied that you’ve made the right decision and that the change will be a positive one.

Allowing Emotions To Influence Business Decisions Can Cost You Money

When we made the decision to wind up our plumbing business, once again Stuart felt sad, as we wouldn’t be able to use the same branding again and it was eyecatching and effective. But I quickly reminded him not to think about it anymore. We’d be able to develop better brands in the future.

Once I’d made the decision to wind up the business, I didn’t allow it to upset me at all, because it was a positive decision. I’d only allowed it a year to break even. But a few hiccups had prevented us from meeting that target.

I know a year isn’t long, if you’re putting quite a bit of cash into a business and employing folk right from the start. But, we’d ran out of cash, because I was still owed money from my fire and flood restoration business (I still am - but that’s another story).

If I’d enjoyed the business, I’d have borrowed the money to keep going. But we’d planned to sell it after seven years and I’d realised that I simply didn’t want to commit that amount of time to it. I just didn’t have the passion for that type of business. And we’d made a mistake starting it, but ending it was a smart thing to do.

Too many people avoid winding up a business for the wrong reasons. Sometimes they don’t want to take the financial loss, or they worry about the stigma attached to doing so and often they simply don’t want to admit they were wrong. And all these thoughts prevent them from doing the right thing.

If You Find Yourself Feeling Emotional About Any Aspect Of Business - Stop And Ask Yourself Why. The only reason you should try to save a struggling business is because you really want to, you’re passionate about the business and because you know it can still work.

So, I didn’t allow emotions to effect my decision making in either of those situations. Then why on earth did I get upset that Stuart won’t be joining me in my new business venture? I stopped to ask myself why and the answers were fairly simple.

I have a cold from hell, so that is making me feel week and vulnerable. Plus I have PMT, so that is making me feel a bit down. My husband has been away for a few days, so naturally I miss him but that doesn’t mean I need to work with him.

Reminding me of these things made me realise that I’m not really upset about this new positive change we’ve made. It’s silly little things that are making me feel sad.

So Don’t Forget: If you find yourself using your emotions to make a business decision, ask yourself if other problems are causing you to feel that way.

Image Credit: The Bitten Word

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From £1 Million To Bust: How To Turn Your Business Round Again

January 30, 2008


What would you do if your business was about to go bust? Do you think it would be possible to turn things round again?

Ian Denny did it. In their 8th year of trading, Ian’s IT company was turning over almost £1 million ($2 million). To an outside observer, the business appeared to be booming. But, things were far from good. In this interview, Ian explains how he resurrected the business after it failed.

Ian - your business had many years of success before you faced bankruptcy. What was your most fatal mistake?

That’s a tough opener. I’ve got so many to choose from! But, If I had to choose one, it is focus.

Rapid business growth isn’t the same as a fast car ride. You can’t feel the speed or the acceleration. It’s just very busy. And as you grow, new problems arise. When a team is bigger you have a new set of challenges like management! And I’ve got to admit, I was both inexperienced and not exactly a natural!

I have picked up how to juggle many things now. But equally, I’ve discovered that you shouldn’t try to spin too many plates, or some will smash. Instead, outsource or increase focus on systems and quality rather than throwing more people at the problem.

Did you lose clients when the business failed? What did you do to try to minimise any losses?

Yes we did lose clients but not in the way you’d expect. The vast majority moved across. In fact more than we could cope with.

We were penniless and needed to start again. We actually helped some clients move to other providers. Not because we didn’t want them, but because we didn’t want to let them down as our small initial team of 4 couldn’t cope.

Were you approached by dubious companies offering paid help when you were facing bankruptcy?

Actually no. We are incredibly lucky to have an amazing accountant. He referred us to an insolvency practitioner he had known and trusted for many years. And it was an excellent recommendation.

If you could give just one piece of advice to someone starting out in business, what would it be?

Plan - pure and simple.

If you don’t decide upon the destination then the journey will meander and you’ll never really arrive anywhere. But, by being clear, setting targets and goals, and aligning your plan to financial realities, you have a better chance than the majority of businesses who fail.

Were you ever tempted to pack it all in and get a job?

For about 6 months before we went bust, I yearned for a job and an end to all the worries about paying salaries, taxes, rent etc.

Now, having doubled in size within 8 months, turned a profit, and reached a point where we are turning work down, I can’t see myself working for someone else again.

There used to be a huge stigma attached to bankruptcy in the UK. Do you think this has improved?

I actually think it has, which was a pleasant surprise. I’ve openly told many new clients we went bust, and it’s amazing how many of them reveal they had a failure.

After we’ve shown off our scars and war stories, it actually builds trust and a better start to the relationship.

What are the most dramatic changes you’ve made to the resurrected business?

I would have to say the opposite of my answer to the first question - focus.

We are so focused on the quality of what we do. We have put systems and processes in place we never had before. And we aim to get 95% of all customer IT problems solved within 4 hours.

That’s a tall order. Some take more than an hour to fix because of the nature of the call. And some take more than a day, especially when you have to wait for a part to be delivered. So every time an incident drags, we have to work harder than ever to stay within target.

If someone else is experiencing difficulties in business and they think they’re about to go bankrupt, what is the first thing you would advise them to do?

Don’t put off asking for help. The longer you delay, the worse it will get. Get professional help, but surround yourself with mentors too; friends in business who know what they’re talking about.

Don’t go with “Pub Talk”, instead trust the people who’ve been there. And try to talk to someone who has failed as they will help immensely. But don’t choose someone who failed and went down the pan also. Choose people who turned it around; positive people. People who don’t bemoan the cruel world and the fact that the world owes them a living.

You will get support from the most unexpected sources. For example our suppliers were amazingly helpful.

Where do you see Multisolutions in five years time?

I see it as a multi-branch operation, at least covering the North West of England, but possibly UK-wide. But, I refuse to be precise with 5 year plans, because I think that’s almost impossible. Either way, it will be based on a sounds financial footing.

Ian, thank you for sharing your story with us.

Have you had similar business problems? If so, please share in the comments section. And if you have any questions to ask Ian, please ask.

To read more about Ian’s amazing business turnaround, check out his blog: Phoenix From The Ashes. And if your business needs IT support (Liverpool and Manchester area), check out his company website: Multisolutions.

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