Many statistics are bandied around and different countries measure success rates in different ways, but overall you can’t argue the fact that too many businesses fail. We don’t need to talk statistics, we all know the situation could be much better.
So what are the differences in businesses that succeed and fail? Many thing come to mind such as, the business model, funding, the executive team, marketing, sales, distribution, product mix, competition, industry, regulatory environment etc. I could just go on. All of these and more have an impact on every business large or small. So I want to share three of the first major lessons I learnt from my experiences.
In over 25 plus years as an entrepreneur I have had my share of successes and failures. As a matter of fact more failure than success, but in saying that each fail was a major lesson. The mistakes weren’t repeated again. Shortly after leaving the Royal Australian Air Force, I started my first business, Prior to that I had been involved in my fathers contracting business for many years, but had never gone out fully on my own till that time.
I had no idea what was involved in running a business. I could run projects on time and under budget and complete them with a skeleton crew, but I wasn’t responsible for the whole business. I didn’t have to make sure that the invoices went out, payments collected, books balanced, taxes, wages and suppliers paid and so on.
My first serious venture was a success, for a while anyway. It was bootstrapped with a van, phone and tools of trade. That’s it. A name was registered, cheap business cards printed and off I went in search of work. To get the sales, cold calling was the method of choice. It wasn’t long before I had a team of installers and I was doing the rounds with customers, managing the jobs and managing the back end of business. Next thing you know more work and then a cash flow squeeze. Well that’s what overdraft facilities are for isn’t it?
- With growth, in any business, but especially in the contracting game where you get paid 30, 60 or sometimes even 90 days after the work was completed you need funding. If you don’t have enough funds you will fail. Making sure that invoices are sent out promptly and followed up regularly if payment is overdue will increase your probability of success.
There were other issues. When you start a business for the first time its all about getting the next job or project. Some are small, and others may take more time and effort to complete. Being a new business and wanting to build up credibility we were taking on every job we could and making sure it was done to the best ability possible to get more follow up work and recommendations. Where is the problem you say? Well, some of those jobs weren’t being invoiced. They were being done for no charge. They were slipping through the cracks and not being properly tracked. Materials costs and expenses taken care of, but no revenue.
- You must have systems and processes to track and measure everything. Jobs, costs, hours, materials, purchases etc. Primarily ensuring every job is billed as soon as it is completed. Establishing systems and processes for your business is the key to being able to manage it effectively.
So after a couple of years of this, things were great with a good revenue stream but there were more lessons, to come. We were growing at a fairly steady pace, we had developed systems to track most things and with multiple installation teams on the road on various projects my work hours were getting beyond ridiculous.
Most days starting around 6:00am ensuring all teams had the tools, materials and plans they required for the day’s jobs ready to go. During the day, running around and visiting each job and customers, cold calling, visiting prospects and quoting jobs as well as fighting fires anywhere they arose. At close of business I’d be back in the office taking care of all the other things you need to do to run a successful business such as invoicing, paying bills, submitting taxation reports and so on. Some days I was lucky to get home by midnight. Lets face it, I was burning out and fast. I needed a break but there was no one to take on my role.
- You may be great at what you do, but you need to plan for the bigger picture and not just being better at what you do. I chose to grow my business to its potential, but failed to start building a management team early on. When the business was thriving there was a big gaping risk. Me. Plan for your success. Failing to plan is as good as planning to fail.
I got a lot out of these three lessons. The great thing is they happened early on in my business adventures. Any one of these events could have pushed the business to failure. If we hadn’t been able to organise an overdraft facility, we would have had to close up shop as there were no operating funds. If we hadn’t picked up on the fact invoices weren’t being raised the business would have again slowly run out of cash. And of course, if you burn out, the business will also suffer and possibly fail as there is no one else ready to take over from you.
There is one more lesson here, and that is you will make mistakes and most of them will not be fatal and you will recover. However the key is learn from those mistakes and don’t make the same one twice.
There is an addition to this blog post with the title “More lessons from entrepreneurial failure.” Please check it out.