Many people think that a lack of capital is a major cause of why businesses fail. But after 30 years of running several businesses, I respectfully submit that these are the real reasons, most of the time.
1. An unwillingness to get “down and dirty.” In the beginning, the owner needs to be willing to do everything that needs to get done.
2. Underestimating the time commitment. Running a business is not 9 to 5. Corporate hours are out the window.
3. No follow-through. It pains me when fellow business owners don’t follow through right away when enquiries come in. People want an answer, not tomorrow, but right now.
4. Horrible cash flow management. This one almost did me in. It’s human nature to overestimate how much money we have, or how much we think will be coming in, and underestimate expenses. Unless it’s absolutely essential to the business, the answer is NO. Ask for a deposit on new accounts and offer as many payment options as possible (PayPal is a must). You need to get as much cash in as quickly as you can once a contract is signed.
5. Bad tax management. Don’t hire an accountant. The vast majority could care less how much tax you owe. Hire a tax professional who can structure your business for the least amount of taxes legally owed. Many businesses with great revenues still go under because of taxes.
6. No value proposition. Saying that you will be an IT consultant isn’t good enough. What value do you bring to the table? Are you faster or better, and in what ways? What is your specialty (or specialties?) Do you offer a guarantee? Are you more flexible, more available? Will you save me money and / or time? If so, how? Can you prove it?
7. No sex appeal. By this I mean there is no enthusiasm, personality or positivity. People are not drawn to indifference.
8. Big mouth. Ego must be replaced by confidence. There’s a big difference between the two. Don’t strive to be “important”, strive to be “relevant”.
9. Horrible online presence. While the hype is about social media, it’s your web site where people will make the buying decision so you need to focus on that first and foremost. You need to be on the first page of google with a site that’s inviting and easy to use.
10. Reluctance to apply for bigger jobs. It often takes as much time to write a quote for a $100,000 contract as it does to write one for a $500 contract.
11. High maintenance clients. Clients who eat up all of your time and don’t pay their bills on time need to go. Most businesses think that any client is good. I totally disagree. A number of customers years ago almost put me out of business. Treasure your best clients, make them feel important. Get rid of any client who, in the end, costs you money and prevents you from securing and keeping high quality clients.
12. Hiring people you don’t trust. Jack Welch said “if you don’t trust them, get rid of them.” Hiring a “bad employee” can destroy your business overnight.
13. Working to please the client. No – instead, work to please you. Your standards will always be higher than those of your clients. Set the bar higher than where they set it. Then – if you’re happy, your clients will be happy. (Whatever you may think about Apple, that is essentially how the company grew).
14. Trying to compete on price. Don’t do it, or you will become a commodity (lowest price wins). Compete on value-added. Stress your “smallness” because your flexibility and availability are advantages over large corporations.
Cory Galbraith is CEO of Galbraith Communications and The Paradigm Institute.