The Business Failed, But Did You?
Q: After years of dreaming about starting my own business, I finally took the plunge a little over a year ago. To say the least, my dream quickly became a nightmare. The business didn't do nearly as well as I had hoped. I ran out of money within six months and had to take out a second mortgage on my house just to keep things going. I have now closed the business and am left with a pile of bills that will probably put me in personal bankruptcy. I don't mean to take it out on you, but instead of telling people how great having your own business is all the time you should also warn them that starting a business is not easy and can be devastating when things go wrong.-- Gene K.
A: Gene, I hope that I have never given anyone the impression that having your own business is a walk in the park. To the contrary, I'm like the proverbial Chicken Little when it comes to warning readers of the obstacles and pitfalls that await those considering the entrepreneurial plunge.
To quote myself from a column I wrote earlier this year, "If it was easy, my friend, everybody would do it."
Just to make sure we're in agreement, let me reiterate the standard warnings once again. Starting a business is incredibly hard work. It takes long hours and deep pockets. It demands unbridled passion and unquestioned commitment. It requires that you give of yourself until you often feel there is nothing left to give. And sometimes, even after you've done all that you can do and given all that you can give, the business fails.
Blood, sweat, and tears can only carry you so far in the business world. Good intentions and grand ideas won't pay the office rent. You can not make payroll with Monopoly money.
I certainly don't mean to make light of your situation. In fact, I know exactly how you feel. I failed so miserably my first time in business that I swore I would never think about working for myself again. All I wanted to do was to find a nice, secure 9-to-5 job that provided me with a nice steady paycheck. I yearned for the opportunity to grow fat and happy on someone else's payroll for a change.
I never again wanted to have to think about customers or employees or withholding taxes or accounts receivable or anything else even remotely associated with being in business.
I just wanted to crawl in a hole and die because my business had failed, and in my All-American, macho male, "you are what you do" brain that meant that I was a failure, too.
Getting over the failure of a business can be extremely difficult, especially if you are one of those entrepreneurs (like I was) who wrongly relates the success or failure of a business to the success or failure of you as a person.
The best way that I know of to get over the failure of a business (and the deep feelings of personal failure that go along with it) is to do an autopsy of the business to help find out exactly what went wrong. Only by discovering our weakness can we build on our strengths (Yogi Berra eat your heart out).
It took a long time and an enormous amount of reflection to realize that the business had failed for many reasons, not simply because I was a miserable excuse for an entrepreneur. I wasn't looking to shuck the blame so much as simply trying to understand what really went wrong. A few years later when I mustered the courage to take the plunge again, I did so with the knowledge gained from my first failed business. I knew what I had done wrong and I knew what I'd done right. Lessons learned, put to good use. Knock wood, this time so far, so good.
Performing an autopsy on a failed business is a simple process, but one that can reveal a wealth of information that you can use should you ever decide to step out onto the business high wire again.
To do your business autopsy find a quiet place where you can sit and reflect on the life of your business. With pen and paper in hand (or laptop on lap) write down everything that you can think of that went right with the business and alternatively, everything that went wrong. Your goal is to create a "Success" versus "Failure" spreadsheet that will help you better understand exactly why the business went south.
For the autopsy to be effective, it is imperative that you are completely honest with yourself. Shove your ego in a drawer and be completely realistic or the autopsy will just become an exercise in futility. You will end up looking for scapegoats instead of reasons.
If your lack of experience was a contributing factor to the failure of the business, write it down. If your brilliant negotiating skills allowed you to close a big deal and beat out a competitor, write it down. If you were undercapitalized or incorrectly estimated your share of the market, write it down. If you had a partner who didn't pull his weight or a product that didn't sell as well as you thought it would or your building was flattened by an earthquake, write it down. Write it all down.
Once you have all the facts in front of you, it's easy to see why the business really failed. You might be surprised to find out that the failure of the business wasn't completely your fault, after all.
Then again, you might discover that the business failure was your fault. If that turns out to be the case, don't beat yourself up for long. Not everyone is cut out to be an entrepreneur and that's OK.
The world would be a miserable place if everyone sat around whining about their lack of customers or complaining about their employees.
Next time we'll take a look at the primary reasons businesses fail and discuss how you might avoid them.
Here's to your success.
Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs.
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My 16 year-old daughter said, "Gee Dad! You look just like an accountant" And she wasn't being complimentary. Accountants are perceived to be boring, stodgy and conservative.Over the years we've been the butt of many jokes. I've heard them all.Why did the accountant cross the road? Because he looked up the file and that's what they did last year! Ha Ha!What do accountants use as a contraceptive? Their personality! Ha Ha!"Why do accountants become accountants? They don't have the charisma to be undertakers! Ha Ha!What do they call an accountant at the bottom of the sea? A bloody good start! Ha Ha!I think I am the exception.That's why I've begun to call myself a business strategist and counselor. "You're still an accountant," says teenage daughter. I am still an accountant and I'm still as passionate about it as the day I started. Because accountants have an impact on people's lives. The advice we give changes people's businesses which in turn changes their lives. I'm excited in my role of accountant.Accounting is not stodgy. Accounting is exciting. Accounting is cool! My ambition is to become the "cool dude of accounting". (do they still say "dude", do they still say "cool". Remember that song: When I say, "cool, man, cool, I don't mean cool, man, cool, I mean you leave me cold, Jack")We were throwing some ideas around with some of our clients as we do from time to time, looking for that unique benefit that our firm gives to our clients. That unique something that distinguishes us from other accounting practices.One said, "You have helped me to improve my business. Not only am I making more profits and have more to spend, but I also have more time to spend away from the business. The more time I spend at home with my family the happier my life is. And the happier I am the happier my wife and children seem to be. When my wife is happy all sorts of good things happen ? even our sex life improves. That's it! You can advertise that using Kelvyn Peters CPA and Associates improves your sex life"I don't think so! Sorry, we haven't accepted his idea. You're completely on your own in that department, but we can help you improve your business and consequently your life. And your goal might not be extra profit but extra time for living! We know we can because we are doing it for others.We repeat ourselves so often because the truth is the truth and there is only a limited number of ways to tell it. You've heard this before. If you are spending every waking moment in a hassle about your business, there must be a better way. There is! Accountants have been ripping off their clients for yearsIn 1973 I attended a workshop for accountants at the Finance Management Research Center then headed by Dr Keith Cleland. The workshop was intended to drag participants into the 20th century."Accountants have been ripping off their clients for years", he told us. The 25 participants were shocked. These represented vibrant accounting firms from all around Australia, both large firms and small. They were at the cutting edge of the industry. Otherwise they would not have been at this kind of workshop.To a person they resented that comment and one fellow wanted to punch him on the nose. (It wasn't me, but I would have held his coat).By the week's end we discovered how we were charging high fees for things that our clients couldn't understand, couldn't use and didn't need. At the same time we were neglecting the information that they did need to increase their profits and safeguard their businesses. 20 Years Later what's Changed? I attended a week long seminar hosted by CPA Australia in 1993 which was to train us in "client based accounting".Dr Cleland presented the initial module. He did not openly criticize accountants this time, after all, it was the CPA's hosting it, but he gave almost the same speech (same jokes, too) as he had 20 years before."These things aren't taught in Universities", he said, "so the accounting profession has mostly ignored them. They have let small business down but things are changing".Know-it-all, Kelvyn Peters had to jump to his feet and say that the doctor had said exactly the same thing 20 years ago. Where were the signs of change? Universities were still not teaching accountants how to help their clients."This seminar with CPA Australia and the suggestion they might make client based accounting a speciality is a good sign", he replied.10 Years Later?Nothing has changed. Our hopes have withered on the vine and small business must look elsewhere for help. Recently I was called in to assist an ailing restaurant. We were happy to work with their existing accountant. We'd rather do the fun stuff and let the accountant do the boring tax returns and compliance work. In this case the client insisted we take over the whole of the accounting function.The accountant was most unhappy. "They are difficult clients", he said, "I have kept the fee lower than it should be and I have done extra to help them".Indeed, he had! The financial statements were beautiful to behold with colored graphs and key ratios compared against industry average. (most accountants still don't do that.I had advised that both wages costs and cost of foodstuffs were too high. Our focus was to form tactics to reduce them."But I had already told them that", said the Accountant, "what do they need you for?'I told him that the client knew the kitchen wages were too high and what he wanted was for someone to show them how to reduce the wages in the kitchen."I can't do that", he said, "I'm an accountant". I would have to camp down there in the restaurant to see what's going on. And they wouldn't pay the fee".Yes they would. They were going to pay me.Most accountants see their role as being the provider of financial statements, cash-flow projections and tax returns, and there's the rub. Each of these is a tool not an end in itself. It's like giving the client a hammer and saw and telling him to go build a house. He needs more than the tools, he needs to be shown how to use them.Of course the client will complain about fees whatever the level if all he receives are not useful to him. Accountants generally are flat out preparing financial statements and tax returns. Meeting dead-lines. They haven't the time to 'smell the roses'. Anything that doesn't help meet a dead-line has to wait until later. Often its too late.I may still look like an accountant, even the cool dude of accounting, but there is nothing I like more than talking with a business owner about his business. 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