Core Business Solutions Advice

Finally we've reached the last of the 'Top 7 Reasons Businesses Fail'.

So far I've touched on:
1-A Lack of Planning(No business plan), 2- Starting a Business for the Wrong Reasons, 3- Insufficient Capital, #4-"No Website" , # 5 Poor Management and #6 Location. So here we go- the last of the top seven reasons businesses fail is: Overexpansion



A leading cause of business failure, overexpansion often happens when business owners confuse success with how fast they can expand their business. A focus on slow and steady growth is optimum. Many a bankruptcy has been caused by rapidly expanding companies.
Why?

If a company expands too fast:

1. Cash flow can be severely limited which can hinder daily operations
2. Additional debt and the accompanying debt service can severely reduce daily financial needs
3. The new focus on growth(new products, increased production) can negatively impact the culture of the company
4. Employees feel the pressure of change and morale can suffer and then quality and customer service begins to drop
5. In the rush to expand, overall profit margins become secondary, or worse, ignored and the money disappears to handle the required growth in payroll, equipment and the other expenses
6. Taking on a new product line or new business and focus could be lost on the core business that brought you to success in the first place

However, I'm not talking about wanting to repress growth. Once a business has an established and solid customer base and a reliable cash flow, one can then allow the success to help you set a measured pace for your growth.

Some indications that an expansion may be warranted may include:

• the inability to fill customer needs in a timely basis
• the employees are having difficulty keeping up with production demands
• the demand in new markets is obvious
• a real synergistic companion business is possible without a large capital outlay for equipment or manpower

If Expansion Is Warranted, how should you proceed? It's all about due diligence!

Here are the steps:

1. Review your current business plan with a trusted objective business advisor to see exactly where you are with your current business financial objectives
2. Bring in your CPA, your banker and other objective trusted business advisors to review your growth plans (Get a second opinion!)
3. Create a business plan for your business growth especially if it is a new product line or new service you are adding to your current ones
4. Carefully research, analyze and review what equipment you will need to grow the business
5. Completely understand what the financial risks are in terms of upside and downside(be brutally honest with yourself)
6. Carefully review and identify exactly who you will need (managers, line employees, etc.) in place to grow the business
7. Write down each step and proceed forward steadily step by step

With the correct systems and the correct people in place you can focus on the growth of your business.

Remember- Focus on growing your business, not on doing everything in it yourself.

So, there you have it! The Top 7 Reasons Businesses Fail:

1-A Lack of Planning(No business plan)

2- Starting a Business for the Wrong Reasons

3- Insufficient Capital

4-"No Website"

5- Poor Management

6- Location

7- Overexpansion

As I mentioned at the beginning of this series a significant percentage of new businesses do fail. Expert opinions abound about what a business owner should and shouldn't do to keep a new business afloat in the perilous waters of the entrepreneurial sea, especially in the economic uncertainties that surround us all.

However, if the seven key factors listed above and discussed in this Core Business Solutions blog series are considered, reviewed and properly positioned, a new business or even an expanding business has a much better chance at success.

Remember- "Well done is better than well said" ~Ben Franklin~

"To get your business to the top, you have to get off your bottom" ~Walt Morey~

Get out there and make things happen!

*******************************************************************************

In 2 weeks or so I'll cover another subject designed to provide business owners with information they can use to help them work "on" their business.

Until Then Please:

Live Simply.

Speak Kindly.

Care Deeply.

Love Generously.

All The Very Best...Always,

Walt Morey - Executive Business Advisor- Accredited by the Institute for Independent Business
http://www.corebizsolution.com/

The past 5 blogs in this series have reviewed the first five of the seven areas that I think contribute greatly to business failure. The first five were 1-A Lack of Planning(No business plan), 2- Starting a Business for the Wrong Reasons, 3- Insufficient Capital, #4-"No Website" and # 5 Poor Management.
Number six in our top 7 countdown (Casey Kasem anyone?) of the reasons businesses fail is the Location of your business.

Location, Location, Location...Isn't that a real estate axiom that a property's location is one of the most critical selling points? Actually is was William Dillard, an American Businessman and the founder of Dillard's Department Store who said it many years ago when asked why his stores were so successful.
Well, when you have a business, the location of your business can both negatively and positively impact your success.
Your college professor was right -- location is critical to the success of your business. Whereas a good location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise.

But consider this: Does your business really need a physical location? I've seen many service oriented businesses fail because the owner really, really, really wanted a physical place, office, building or location for their business. In the management consulting segment alone I've seen business owners struggle to be profitable because they had to have a nice big office in an office building or some other place and the monthly expense and time, etc, was more than they could handle. They just had to have a 'Bricks & Mortar' location to feel like they really had a going concern. Remember, your business is you, not an office or a location. You are the engine that makes your business run. Lets face facts, all businesses have monthly expenses (marketing, travel, advertising, websites, supplies, etc, etc.) that must be paid before anything else. It's been called "making your nut". If you can operate your business without renting office space, do it. Adding the weight of another $400-$1,500 per month expense (plus what you have to buy to fill and furnish the office) can drag a business under very quickly. I know many service type businesses (Computer Repair, Financial Planning and Insurance Sales, Photographers, Consultants of any type, and many more) that do very well working out of a home office scenario. The key is to have a separate room to use for the business and to have the discipline to work in it and not get involved in any daily household activities that could interrupt your business processes. [I'll get into that issue in a future posting to this blog]

However, if you absolutely need a physical location because your customers need to find you to buy your product or use your service then here are some factors to consider:

• Where are your customers? Select a location that's closest to your customers and one that can be found easily. Does it have visibility. What are the signage possibilities?
• Look at traffic, accessibility, parking and lighting. Is the location attractive both outside as well as inside?
• Location of competitors- Are your competitors nearby? If yes, is that problem? It may not be. Sometimes you can get sales from customers from a nearby business that has a similar customer demographic. Customers may want to try something different or new.
• Will the office and location really suit your needs? Don't settle. Get what you need. You'll not be very happy after you've signed a long term lease and it's just not right. Have a trusted advisor review you plans and your location for an objective viewpoint.
• Condition and safety of the building obviously should be a large item for consideration. Is the building up to code? Is the inside well lit? Can you say 'liability'?
• Sometimes there are local incentive programs for business start-ups in specific targeted areas of a town or city that provide financial assistance if you make improvements to the property. Contact local officials and inquire or talk to other business owners in the area to see if there are programs to help.
• The history, community flavor and receptiveness to a new business at a prospective site is important to know. I once knew a restaurant owner that opened in a location that in the recent past was the location of a poorly managed restaurant that never really succeeded. Just putting a sign up saying "Under New Management" is not going to change most potential customers' perception. You may have to spend much more in marketing costs to attract your customers than would at some other more favorable location.
• What are the lease terms. Monthly plus, plus, plus? Or are all the utilities and cleaning services included. Are there advantages to leasing for a stated term versus month to month. Can you make a deal with the landlord?

The bottom line is if you have to have an office or business location, do your homework!

A little extra due diligence upfront can save you a huge heartache and headache.

**********************************************************