Small Business Plans | Avoiding the Failure Syndrome

Friday, June 18th, 2010 at 5:06 pm

Small Business Plans are essential for the start up business as well as the mature business. Think of Small Business Plans as checklists for growth and profitability. The Small Business Plans do not guarantee success, but without the Small Business Plans they guarantee failure. As you develop your company think of the areas that are potential minefields or failure fields. Here are some of those minefields to avoid:

Choosing a business that isn’t very profitable. Even though you generate lots of activity, the profits never materialize to the extent necessary to sustain an on-going company.

Inadequate cash reserves. If you don’t have enough cash to carry you through the first six months or so before the business starts making money, your prospects for Success are not good. Consider both business and personal living expenses when determining how much cash you will need.

Failure to clearly define and understand your market, your customers, and your customers’ buying habits. Who are your customers? You should be able to clearly identify them in one or two sentences. How are you going to reach them? Is your product or service seasonal? What will you do in the off-season? How loyal are your potential customers to their current supplier? Do customers keep coming back or do they just purchase from you one time? Does it take a long time to close a sale or are your customers more driven by impulse buying?

Failure to price your product or service correctly. You must clearly define your pricing strategy. You can be the cheapest or you can be the best, but if you try to do both, you’ll fail.

Failure to adequately anticipate cash flow. When you are just starting out, suppliers require quick payment for inventory (sometimes even COD). If you sell your products on credit, the time between making the sale and getting paid can be months. This two-way tug at your cash can pull you down if you fail to plan for it.

Failure to anticipate or react to competition, technology, or other changes in the marketplace. It is dangerous to assume that what you have done in the past will always work. Challenge the factors that led to your Success. Do you still do things the same way despite new market demands and changing times? What is your competition doing differently? What new technology is available? Be open to new ideas; experiment.

Overgeneralization. Trying to do everything for everyone is a sure road to ruin. Spreading yourself too thin diminishes quality. The market pays excellent rewards for excellent results, average rewards for average results, and below average rewards for below average results.

Overdependence on a single customer. At first, it looks great. But then you realize you are at their mercy. Whenever you have one customer so big that losing them would mean closing up shop, watch out. Having a large base of small customers is much preferred.

Uncontrolled growth. Slow and steady wins every time. Dependable, predictable growth is vastly superior to spurts and jumps in volume. Going after all the business you can get drains your cash and actually reduces overall profitability.

Believing you can do everything yourself. One of the biggest challenges for entrepreneurs is to let go. Let go of the attitude that you must have hands-on control of all aspects of your business. Let go of the belief that only you can make decisions. Concentrate on the most important problems or issues facing your company. Let others help you out. Give your people responsibility and authority.

Putting up with inadequate management. A common problem faced by Successful companies is growing beyond management resources or skills. As the company grows, you may surpass certain individuals’ ability to manage and plan.

While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second. Whether you’re starting a business or expanding one, sufficient ready capital is essential. It is not, however, enough to simply have sufficient financing; knowledge and planning are required to manage it well.

Can you start to understand the significance of Small Business Plans? Small Business Plans help you avoid problems like those I have discussed above. Small Business Plans are the operatives that help clear the mines so you will not have problems explode in your face. Now you don’t have to have a Small Business Plan, you can walk the path yourself; you can be your own mine clearer. Is that what you really want?

Use a professional mine clearer — our Coaching Staff — Let them walk the walk for you.

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