A common fear of many business owners is that of losing their company. According to the SBA, over 50% of small businesses fail in the first year and 95% fail within the first five years. Some important reasons for this lack of success are:
Lack of vision and purpose by principals
Failure to establish and/or communicate company goals
Failure of the CEO to concentrate on strategic rather than technical issues
Inability to make the difficult decisions
Poor market segmentation and/or strategy
Lack of market knowledge / competition
Over dependence on specific customers or individuals in the business
Lack of management systems
Lack of financial planning and review
Inadequate capitalization
Fearing the boss more than the competition
Too much risk
A dangerous corporate culture
A dysfunctional board (advisory or formal)
Even though many of the above conditions may be in operation, companies still turn a blind eye to the problems.
There are some excellent preventive measures that a company can employ to help improve their chances of success. One useful tool that can be a warning sign of impending danger is the Altman Z-score. The Z-score is a predictor of bankruptcy. When properly applied, the indicator can alert a business owner that all is not well and the future is in jeopardy (note: if you have never encountered the Z-score, "google" the term or email the author).
Another excellent tool is having an advisory board that has the fortitude to disagree with the owner. Unbiased and candid advice is priceless in helping a company navigate the ever changing business environment in which we all operate. This need can also be met by participating in a professional CEO group such as TEC.
Finally, too many business owners give lip service to their strategic planning process. Be sure to invest in the process, map your direction and follow your path to success!
Copyright 2012 - Jim Lindell