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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Prevent Business Disaster: 7 Tips For Covering Your Ass In Business
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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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7 Tips For Covering Your Ass In Business

September 4, 2008

I’ve learned from experience and mistakes that many business problems can be prevented by covering your ass to begin with. Here’s 7 ways to do this:

1. Get everything in writing - absolutely everything. Don’t forget about a single thing and never rely on the other company involved to do it. Put what they’ve agreed in writing yourself and ask them to send confirmation.

2. Never sign a serious contract without having a solicitor or expert look at it. If you’re dealing with a company who is trustworthy, they will actually ask you to get a solicitor to look at it. Be wary of a company who advises you not to bother using a solicitor.

Don’t offer credit without running a proper check.
Put any quotes etc in writing, before you begin any work. And if someone doesn’t have credit, make sure they’re going to pay you at the end of the job.

Tell them this is required, before you even begin and ask them whether they intend to pay by cash, cheque or card. This avoids any excuses when you’re done - and believe me, plenty of folk will try to make them - eg. lost cheque book etc.

Also, don’t forget to keep an eye on your own credit score. Getting credit in the current economic climate is hard enough to start with. So you don’t want errors, or identity theft screwing things up to you when you need to buy, or lease important equipment for your business. You can get a free credit report here, in a few minutes

4. Know where you stand re: employment laws etc. And make sure you have somewhere you can turn to for advice when you’re unsure. You don’t necessarily have to fork out legal fees. Signing up to a legal advisory service can be more cost effective and many offer 24 hour advice. But ignore the opinions of well meaning friends on these issues. People will often advise you to do what is fair, but fair doesn’t always equal legal.

5. Make Sure You’re Insured
for anything that could go wrong, including theft or damage to expensive equipment. Don’t scrimp on insurance - not having it could ruin your business. I never thought I’d make a claim but I had equipment worth thousands stolen, a couple of years ago. You can get a free customised business insurance quote, at low rates here.

6. Plan Ahead For Potential Problems. Make written plans on what you’ll do if disaster strikes. Your business may never suffer fire or flood damage, all your staff going down with flu, you winding up in hospital etc etc. But if you think of all the things that could go wrong and write down how you’d deal with them, it will be easier to cope if they do happen.

7. Never Over Promise. Don’t put yourself in a difficult situation by promising more than you may realistically be able to deliver. Your customers will love you more if you promise less and either deliver it, or do better.

Is it too early to think about covering you ass, because you still haven’t managed to come up with a good business idea? Then the Business Discovery Group might be just what you need. Click here to learn more about using the Business Discovery Group, to come up with a profitable business idea.

Can you think of any potential pitfalls in business, or offer any ass covering advice? Or do you have any questions?

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