Watching your business crumble like a pack of cards is better imagined than experienced. Apart from spending time and money to revive your business, the thought of starting all over from scratch is definitely crippling.
When Adolf Merckle could no longer bear the psychological burden of seeing his business empire crumble, this powerful industrialist ended his life through suicide.
According to Financial Times, “the desperate situation of his companies caused by his financial crisis, the uncertainties of the last few weeks and his powerlessness to act, have broken the passionate family entrepreneur.”
That’s how bad it could be for some people. Although this could be the worst case scenario of the aftermath of a failed business, other consequences aren’t always good.
Therefore, to avoid sinking in the pitfall of a crumbling business, you must identify such factors that could lead to it. This would help you guard against any impending debacle.
Here are 4 things that can ruin any business if they’re not properly taken care of.
1. Lack of planning
Planning is the foundation upon which every business should be built. The absence of it will definitely spell doom for your business. So before starting out, ensure that you have a solid business plan on ground and make sure you clearly define your goals and objectives.
Unfortunately, a lot of businesses often go halfway into their businesses before thinking about crafting a workable plan. Businesses like this will more likely disintegrate when there’s an economic recession.
Another mistake some entrepreneurs often make is not building up enough reserves of money and energy when there’s bad luck, or not having a backup plan during difficult economic times.
2. Working with the wrong team
Teamwork is essential for high performance in every organization. You must get the best hands to work with and also ensure that members of your team key into your company norms and values. A team that doesn’t share in your passion will do more harm to your business than good (if any at all).
So it’s important to get it right from the moment you’re hiring your staff by getting the right person for the right job. You should hire based on merit and strive to build a cohesive team. Building a great team is important because it leads to idea generation, increases efficiency, boosts communication and improves cooperation.
3. Cash flow mismanagement
Cash flow is the net amount of cash and cash-equivalents moving into and out of a business. It is used to assess the quality of a company’s income, that is, how liquid it is, which can indicate whether the company is positioned to remain solvent.
Cash flow management is one of the most pressing tasks for every organization. This is because it allows you to determine when your cash needs will occur, identifying the best sources for meeting your additional cash needs, and being prepared to meet those needs when they occur. In addition, it allows you to analyse your overhead expenses, and guides you to make certain decisions on issues such as outsourcing and loan repayment which are both crucial for business survival.
4. External factors
As much as you want to tighten the loose ends within your organization, you should also watch out for external influences that could ground your business. One of such factors includes identity theft.
Identity theft is the deliberate use of someone else’s identity; a situation that has to do with data breaches. When your identity is stolen, the thief can spend your hard earned money, take loans in your name, access your medical records, ruin your credit score and destroy your reputation. Therefore you must by all means protect your business against identity fraud.
Another crucial external factor is competition. In a dynamic world where things are changing rapidly, companies are looking to outsmart their competitors with new innovations and outright challenge. That’s what happened to Nokia, the telecommunication giant, when its reign was curtailed and was literally ousted from business.
Again, competitors will stop at nothing to steal your ideas, customers and even your best employees. So to remain relevant in business, you must study your competitor’s strengths and weaknesses, and never compromise on being better even if you’re already an industry leader.
In summary, the first three points discussed herein are all internal factors. If they’re properly taken care of, you’ll have no problem surviving in business. However, you must be wary of external factors too as they could create an equal amount of havoc to your business, if not more. Since you’re not directly in control of these external factors, you have to increase your awareness on industry trends to be able to handle them effectively.