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How to avoid business failure| Magnetic Alliance


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How to avoid business failure

Business Failure – How you can avoid it


You’ve heard the stats about small business success. Around 60% of businesses don’t make it past their third year. It’s intimidating, yet numbers of new businesses each year in are steadily rising.

There’s a long list of contributing factors as to whether a business fails or succeeds.

Leadership, cash flow, market positioning, uniqueness and business model, to name a few. All elements bundled into the planning and management of your business. 

If you haven’t got a business plan then it’s impossible to hit a target. 

With poor management, it’s easy for your business to get out of control.

With no target to hit and loss of control at the wheel, that’s when businesses start to fail.

How to regain control and avoid business failure

It’s not unusual for us to meet with a business owner who describes themselves as ‘wearing all the hats’ in their business. This is a good sign that the business is suffering from poor management. Not because the business owner is doing a bad job, they just don’t have the structure in place to do a great job. 
They’re working long hours and doing jobs they aren’t great at out of sheer necessity, eating into the time they can spend on doing the work they are great at. The stuff that adds value to the business and for clients.
This situation arises because businesses in their early stages will often grow ad hoc, not in a planned way. In turn, this leads to lower profitability because the business operates at capacity, unable to capitalise on opportunities.
If I had a dollar for every person who’s ever told me that they do tasks in their business ‘because they can’ rather than outsourcing them I’d have an overflowing piggy bank. 
The mindset of wearing as many hats as you possibly can until you cannot possibly squeeze any more work into a day stifles business growth. It also leads to burnout. Burnout regularly leads to business failure with the realisation that you’d be more profitable and relaxed by going back to a 9-5 job.
We know, that’s not why you started a business. You started a business to be successful and profitable, to be more flexible with your time and build something that you could, ultimately, look at and feel proud of. 
If you’re finding it difficult to meet customer needs in a timely manner, and probably feeling burnt out as a result, that’s an indicator that your business is ready for growth. How you approach this growth phase is going to impact on your success. Your business cannot expand if you’re trying to do everything yourself.
The first step to regaining control of your business is to let go of trying to control EVERY piece of it.

Understand roles and responsibilities

The first thing you need to do is understand all of the current roles and responsibilities in your business.
Next you need to consider what your ideal business structure would look like at increasing capacity and allocate roles and responsibilities accordingly.
Grab a piece of paper and pen, or your white board, and start mapping this out.
Mapping out your ideal organisational structure will highlight:
  • Existing gaps in your structure
  • Responsibilities that are not well aligned to roles
  • Where internal processes are required
  • Opportunities to shift lower value tasks to lower cost staff by outsourcing or hiring an offshore staff member.
  • Additional resources required
  • Overlap between roles that create inefficiency
It’s easy to assume that the next step is to reorganise your current workforce and rush out and hire new people to fill gaps. It’s not.
To give your whole team the best chance of success you need to be able to provide them with clear job descriptions and business processes. Your next step is to understand and document the individual tasks that make up your business.

Benefits of business processes

Well defined business processes are critical to ensuring the best chance of success in the long term. Just quietly, they also increase the value of your business should you ever wish to sell it.
Having mapped out all of the roles and responsibilities in your business you’ll have a good understanding of the different tasks that are required to make your business run. From production to sales and marketing, finance and human resource management. 
Some tasks will have a degree of autonomy but most can be broken down into a series of repeatable steps. Documenting the repeatable steps will create your processes and make it easier to understand who the best person is to be responsible for a task.
Developing standard processes and workflows has a number of benefits including:
  • Increased efficiency and reduced rework
  • Easily measurable (ever heard the saying you can’t manage what you can’t measure)
  • Identifies opportunities for automation by implementing a technology solution
  • Consistent and repeatable outcomes irrespective of who does the work
  • Identify opportunities for process automation
  • Employees are happier because they know what’s expected and feel more productive
  • More agile and adaptable to change
  • Transparency
  • Higher level of customer focus
  • Enable you to optimise in the future
Documenting processes within your business can seem daunting when you have none. The good news is that you don’t have to do them all in one go and there are people and technology that can help you get the job done.
Start with tasks that are simple, repeated regularly and don’t require a high level of technical skill or training will enable you to outsource them or hire someone offshore. Offshore staffing is allows you to shift lower value, often time-consuming tasks to lower cost staff. Businesses that embrace this are often the most successful.
Tasks that can be done by an external specialist EG bookkeeping, invoicing, marketing, payroll are also great to delegate. Depending on how much work you need completed you should compare outsourcing with hiring your own offshore staff member.
Complex, high-level tasks EG budget development, are completed less frequently. The best time to create these processes is when that task is next completed. Start by documenting the work that was completed then review the work done to identify opportunities for improvement the next time that task is completed. Combine the work completed and review to create an optimised business process.

Have the right people doing the right jobs

After looking at the roles, responsibilities and processes in your business you will be better positioned to both hire staff and outsource as appropriate. Sustained, comfortable business growth will become easier. Best of all you’ll feel less overwhelmed and there’s a good chance that your business will become more profitable at the same time.
More income, working less hours…that’s the business dream isn’t it? Check out Dave’s story sharing how we’ve helped him transition from working 6+ days a week in his business to working only one day a week on aspects of the business he really enjoys.
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