Written by Jonathan Trent and Mazyar Hedayat Edited by Mazyar M. Hedayat, Esq.
Small business remains the backbone of the most vibrant economy in the world. America leads in innovation and hard work thanks in large part to small businesses and entrepreneurs. But despite the best intentions of their owners small businesses have a high failure rate; especially in the first few years of operation.
But why the high failure rate? One of the most common reasons is that the business owner, entrepreneur, or manager of the business
- underestimated the competition, or
- overestimated the business itself.
And that makes sense: often business owners, managers, and key employees convince themselves that they can ride out storms in the market or overcome the negative economy by squeezing themselves, their employees, and their company. But in lean times like these a single misstep can be fatal; and above-all responsible business owners are realistic. That’s why Bankruptcy reorganization has been part of our law since the framing of the Constitution – at first among the States, and more recently through Federal Bankruptcy Code. And the institution of bankruptcy – whether liquidation or reorganization – exists for a good reason: sometimes you need to start over.
Additional Causes of Small Business Failure
Of course in addition to the 2 already mentioned, there are myriad reasons small businesses fall on hard times and become unable to recover. For instance, even in the best of times a small business can be plagued by inadequate bank financing and impatient trade-creditors: all it takes to knock over the balance sheet at that point is a stiff breeze. That’s where the recession, the recent real estate crash and subprime mortgage debacle, and good old-fashioned overseas competition, come in. These structural economic problems make everybody nervous: customers, suppliers, employees, lenders, and management. All it takes is one non-paying customer or a saturated market to tip over the business and cause a vicious cycle.
Growing Smarter All The Time
Once problems begin to surface they must be dealt with quickly and efficiently. If not, then mounting debt, management panic, impatient creditors, employee confusion, dissatisfied customers, and a dwindling revenue stream will create the “perfect storm” for failure. But does that mean businesses should insulate themselves from debt by casting aside the opportunity to grow? Obviously not: saying “No” to growth is not a rational choice. Luckily, businesses in search of smart, lean ways to grow have more options now than ever:
Successful businesses are founded on the backs of effective and dedicated employees. You need a pool of talent and experience, but what happens when the most qualified people don’t live anywhere near your location? You could settle for less-qualified employees, or you could try to convince them to relocate – both options could end up costing you more in the long run.
The more effective option, if it is possible in your line of work, would be to allow them to work remotely and communicate through teleconferences, video chats, instant messaging and a host of other options for keeping in touch. Documents can be sent through email, if you’re a traditionalist, or they can be uploaded directly to a central depository where other members of the company can have instant access.
Careful budget control is a critical element of any business endeavor, and working with skilled employees in different locations is a cost effective way to recruit the talent you need without overspending. This is also a simpler way to scale the business according to demand – it’s easier to bring in employees on an as-needed basis like this to complete projects rather than to try to acquire more space in-house for new employees.
Finding and working with new clients and customers is an ongoing process for any company. If you are providing consulting, legal, or financial services, it is possible to use those same communication tools to expand your client base and get beyond the local geographic restrictions. Again, this must be done with a careful strategy in mind, because it is easy to overreach here, as well.
Modern tools provide many opportunities for reliable and effective communications, but that may not be the source of your problems. These tools may open up some new channels, but if you are too far behind on your work, or trying to deal with too many clients at once, it won’t make a lot of difference. Perhaps it is best to think of these solutions as a way to complement your business and make your services better. Just make sure that you can offer the same, quality experience to every one of your clients – wherever they are.
Growth With Security
The faster a company grows, the more prone it is to overlook or miss an important security element which can lead to a lot of problems in the future. Digital security is a major issues, and there have been many companies over the last few years that have suffered major breaches. As you add more people to your company – whether remotely or in-house – make sure that they all understand the proper security measure so that important company and client data is never lost.
In the end, it’s about using all the tools at your disposal to create a strategy that will help you avoid bankruptcy. Define your goals, don’t force growth for the sake of growing, and save money wherever you can. This will help you be more profitable in the long run and provide a convenient and effective working environment for employees.
Getting Good Advice Is The Key
Congratulations! If you’ve made it this far then you want to be prepared and, better yet, avoid such growing pains altogether. So here is the best advice you’ll ever get along these lines: assemble your business SWAT Team before the worst happens. Your SWAT team consists of accessible, trustworthy, knowledgeable professionals you can turn to at a moment’s notice:
- Insurance Agent
- Real Estate Agent
- Marketing Person
Begin putting your team together by talking to us. We have been providing advice and counsel to small businesses and their owners – from business law to bankruptcy reorganization – for nearly 20 years. In fact, I earned a Master’s Degree in Business Administration even before I was a lawyer.
Feel free to reach our office using the Contact Form on this page. To learn more about how small business can survive and thrive in the new (new) economy, download our Free Report. And thank you for your time.
About Jonathan Trent: Jonathan Trent is a web marketing specialist with NextUC, which provides audio, video and web conferencing solutions. He is a sports fanatic that enjoys writing about the internet and modern technology. He has written several respectable articles about the advancements and future of communication and technology.
About Mazy Hedayat: Learn more about Mazy Hedayat and M. Hedayat & Associates, PC on our Website.