The typical ways that small businesses fail – Part 2

Last month we looked at the key reasons small businesses fail, so now we are going to investigate the planning we need to do so we can avoid the same fate.

The key tools needed before venturing out

I know from my experience founding and growing my own companies that you need a couple of key tools to build the initial foundations. At EOS we advise all businesses to set up fundamentals including a strategic and executable business plan, accountability chart which provides clear and simple structure of roles and accountabilities, a simple scorecard with accountable metrics, and finally, a company meeting schedule including annual planning, quarterly planning, and effective weekly meetings to ensure everyone remains on track and is executing the business plan.

It’s also highly recommended that you seek the advice of an accountant or CFO that is experienced in business start-ups, to assist you in identifying the required cash you’ll need to float it. Plus, you should also carry out the necessary due diligence to prove that your idea will work in the first place!

Planning to ensure success long-term

I’ve always been a believer that a business is only as good as its people. If you have talented people on board, covering the key areas of the business, they typically are able to predict, plan and execute well in their areas of the business. And much like a recipe, if each of the ingredients is correct, collectively the result will be a success.

To support this talent, there should also be a clear, simple and effective management operating system in place. This is the system of tools that is used to run the business effectively, resulting in a clarity of direction and expectations, and the ability and accountability to meet those expectations. Put simply, it forms the foundation of solid management practices which result in bringing the vision to life.

How businesses can get back up after failing

So, what if you’ve already given it a good go and you’re floundering? Resuscitating the business really depends on what specifically caused it to fail. For example, if you had a proven product or service, but simply ran out of cash to support it, then with the correct financial planning and backing behind it for the next phase, recovery could be possible. That said, I would also question the abilities of the leadership team members in this instance and questions if they really have the necessary skills to deliver.

At the end of the day planning costs nothing. So, plan, plan and plan. Test your ideas, do your research, plan your timing, plan your capital options, and then execute. As they say in construction, moving a wall on the drawings costs five minutes and some ink for a reprint. Moving it once it’s built is not only expensive, but sometimes even impossible. So, get it right on paper the first time.

Daniel Davis, CEO, EOS Asia Pacific (the Entrepreneurial Operating System)

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