7 Steps That Will Stop Businesses From Failing
Current statistics for new businesses aren't promising—only 30 percent make it more than 10 years.
But many business failures can be avoided by using a few easy principles, according to Bill McBean, author of the new book The Facts Of Business Life.
McBean shared seven steps from his book that will breathe life into any business and increase its odds of success. He's spent decades running a successful auto business and started his own investment firm.
Here are his tips:
1. Business owners should lead, so others will follow. "Good business leadership begins with defining the destination and direction of your company and deciding how the business should look and operate when it arrives," McBean writes. "It also involves developing and continuously improving on a set of skills in order to move your business from where it is today to where you want it to be tomorrow."
2. Owners should take control of their businesses. If owners don't have a hand in day-to-day operations, they have no control over whether businesses will succeed, McBean argues. "Don’t stop at pointing out what should be done and how, also clearly state and emphasize that there will be consequences when standard operating procedures and processes aren’t followed." Be stern with employees.
3. Put protecting a company's assets above all else. Businesses should educate themselves about where they've invested and how those investments are doing. "The key is to understand what all of your company’s assets are, and then guard them closely and work to maximize the profits they represent," McBean said. "Because if you don’t, they will haunt your business and cause financial pain when you least expect it."
4. Start planning the future instead of predicting it. Business owners can't predict the future, but they can make educated decisions depending on what they know. McBean gives the example of Ford Motor Company. In 2008 and 2009, its competitors, GM and Chrysler, ran out of cash and needed taxpayer bailouts to avoid bankruptcy. But years prior to the credit crunch, Ford began to restructure its debt and raised billions as it continually added to cash reserves. "Was this luck or good planning? Industry insiders will say good planning," McBean writes.
5. Market the business to make sure it stays relevent. “New business owners especially are nervous about marketing because money is already so tight at this stage,” McBean said. “But you have to make the necessary effort to connect consumers to your company."
6. Remember that the marketplace is a war zone. McBean says it's necessary to develop a "warrior mentality" instead of shrinking away from the competition. "In order to be successful and remain that way, you have to continually focus on the market, react to it, and fight for what you believe should be yours. If you don’t, your competition will win the war," he says.
7. Focus on general business principles instead of the specific industry. "You need to understand the various aspects of business as it is more broadly defined, such as accounting, finance, business law, personnel issues, and more, and how all of these impact each other and the decisions you make," McBean says.
McBean says his tips will help any business to succeed.
"Ultimately, I don’t believe that any entrepreneur can succeed—or at least reach his or her full potential—without knowing, understanding, and applying these concepts,” he writes. "If you commit yourself to understanding these facts you’ll be creating a best-odds scenario for success.”
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