Business Failure
Business Concern
One in four private sector U.S. businesses fail within their first year of operation. After five years, almost half (48%) have failed. After ten years, the failure rate is 65.3%. (According to data from the U.S. Bureau of Labor Statistics.) Generally, businesses fail when they run out of cash. Cash flow is a metric indicating how money is coming in and being spent in a business. Marketing decisions influence how much cash comes into the business. Operations and growth decisions control how the money is spent. Good decisions made about cash flow will prevent business failure. Small to medium...
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Discovering the Owner Agreement for Your Business
Business Concern
Where there is a small or medium sized business with more than one owner, there is an owner agreement. It may not be obvious – in most cases it is not written. But for any multi-owner business the owner agreement must be there for the business to function. To start a business there must be agreement about the business entity to use, the initial capital, the basic governance, and the operational functioning of the business. In various documents regarding these matters there will be writing documenting the decisions made by the owners, but most owners do not document the basic strategy that...
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Where to Find Help
Business Concern
As the owner of a small to medium size business, you may have felt the need to ask for help but not felt comfortable doing so. Owners of businesses are often skilled in the business they own and enjoy the respect of their family and friends. If their businesses are successful (profitable), it is usually based on their leadership and good fortune. But things change and sometimes the successful are faced with difficulties and even poor results. The humility it takes for an owner to recognize that business is a team effort and that the policy-making group of a business needs help is a principal...
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Creation of Wealth for Business Owners
Business Concern
Among the common goals of members of a capitalistic economy is the creation of wealth. This is often a reason why people own businesses. For an individual, the concept of wealth creation is the escape from dependence on earning funds for current expenses to live a certain lifestyle to building up assets and resources that appreciate over time and are of a magnitude to sustain that lifestyle or a better lifestyle without the need to earn funds for current expenses. Creation of wealth is a reference to accomplishing financial independence through the creation of passive income from investments....
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When Planning Becomes Dynamic
Business Concern
Traditional planning is static. If there is a written plan, we see the plan formulated, documented in writing, presented at a meeting, and then put on the shelf to be consulted for next year’s retreat. This is the opposite of a forceful and changing dynamic plan. A dynamic plan can accomplish continuous improvement in business performance over time resulting in increased profitability. How does a static plan become dynamic? The answer is in the format of the plan. To be forceful a plan must be understood and implemented at all levels of the business – operational as well as management. The...
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The Concept of Time – How Its Progression Affects Important Tasks
Business Concern
The Concept of Time – How Its Progression Affects Important Tasks Time is the progression of events from the past to the present into the future. Time marches forward relentlessly. From birth to death, we age, and every moment that passes is unique and unrepeatable. The more important tasks we accomplish within our lifespan, the more fulfilling and impactful our lives can be. But what defines "important"? Is it happiness? Recognition? Pursuing a passion? How we define, or not define, “important” has a great deal to do with how we spend the time of our life span. I believe in defining...
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Pay Attention to What is Important
Business Concern
In the new year make sure you pay attention to what is important but not urgent. This is the time to make resolutions – that process involving review of the past year and resolving to do something different in the new year. It is a given that urgent but not important matters often replace important but not urgent matters in the time allocation of business owners. This diverts the owners from accomplishing important long-term tasks such as obtaining maximum value for their business interests. To pay attention to what is important you must prioritize paying attention to what is important by...
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Important Accomplishments
Business Concern
As a business owner imagine how it would feel at the end of the year to look back and realize you have reached one or more important accomplishments. You used your values to create a strategy. You set a goal at the beginning of the year. You created a plan to act to accomplish the goal. You executed the plan by acting to reach the goal. The feeling would be one of satisfaction and a sense of accomplishment. For most owners this feeling of satisfaction will not be possible. Most will not have articulated their values and created the strategy to set the goal. Some will not have published the...
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Establish a Profitable Business – Do Not Stop There!
Business Concern
No one said it would be easy. If you are the owner of an interest in a business which has become profitable, you and your team have done something right and it probably was not easy. Moreover, it will not be easy to keep your business profitable. What follows is a chart for the failure rate year by year from a LendingTree analysis of U.S. Bureau of Labor Statistics data (). Time Frame Percentage of Failure Within 1 year 23.2% After 2 years 32.8% After 3 years 36.2% After 4 years 43.2% After 5 years 48.0% After 6 years 52.9% After 7...
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Shoulda, Coulda, Woulda
Business Concern
The idiomatic phrase – shoulda, coulda, woulda – conveys the feeling you as the owner of a business might have in three years. Ok, “Could've, Would've, Should've” is a Taylor Swift (and Aaron Dessner) song. But it derives from the phrase often written as “shoulda, coulda, woulda.” The combination of the meaning of each – should conveying correctness, could conveying possibility, and would conveying a thwarted intention – yields a meaning of the uselessness of looking back or looking for excuses. Pat Riley, President and former coach of the Miami Heat and the Los Angeles Lakers...
info_outlineOne in four private sector U.S. businesses fail within their first year of operation. After five years, almost half (48%) have failed. After ten years, the failure rate is 65.3%. (According to data from the U.S. Bureau of Labor Statistics.)
Generally, businesses fail when they run out of cash. Cash flow is a metric indicating how money is coming in and being spent in a business. Marketing decisions influence how much cash comes into the business. Operations and growth decisions control how the money is spent. Good decisions made about cash flow will prevent business failure.
Small to medium sized businesses are often founded by someone with a good idea or skills that the marketplace demands at a point in time. Over time one person rarely possesses the knowledge and time to make all decisions concerning marketing, operations, growth, and changing business conditions. To make good decisions and prevent failure, there must be an owners’ strategy setting goals and actions taken by all elements of the business to accomplish those goals. Where the strategy changes or business conditions change, decisions affecting cash flow must be made by using the resources of the entire group constituting the business. The procedure of making decisions should be a group decision making process.
When decisions are written down, they constitute a plan. A business plan documents decisions about cash flow and establishes an operating budget for the business. As marketing, operations, and ownership changes, decisions made by the group decision-making process should be documented to all elements of the business as a part of or a revision of the business plan. This makes the planning dynamic.
Most small to medium sized businesses do not have a written business plan. This is the primary reason for the high failure rate. Business owners have a difficult time instituting a group decision-making process. Many owners plan by looking in the mirror and making decisions without the knowledge available in all elements of the business. Owners make strategy decisions and do not document those decisions. Where there is no business plan, goals are not articulated, and operating decisions are made without understanding the owner’s strategy.
Given the failure rate, it helps to focus on success. What is success for business owners? Most owners would be very happy to sell the business for maximum value in three years.
The Prior Diligence strategy and Dynamic Planning process provide owners with a methodology of accomplishing a sale of the business for maximum value in three years. Implementing a Prior Diligence strategy and accomplishing Dynamic Planning involves installing a working decision-making process in the business, documenting the owners’ strategy, establishing goals, and articulating the actions to be taken to reach those goals. All of this is described in detail in the Owning a Business substack at rickriebesell.substack.com.
The best way to avoid business failure is to adopt the Prior Diligence strategy and implement Dynamic Planning with the goal of selling the business for maximum value in three years.