Why do Businesses Fail? Part VIII


Published: February 10, 2020

Courtesy of Markmanso.net

The Failing of Closely-Held Family Businesses

Being an entrepreneur for over forty years (1978-2020), one sees many things not only in their own family business but in others as well. The operation of a closely-held family business is a challenging career, and the key is getting everyone on the same page; the sacrifices, investments now for wealth, and prosperity in the future. It all starts with the spouses or significant others, if they don’t buy into the dream, it all can be sabotaged, destroyed before it even begins.

1. Spousal commitment

Being an entrepreneur is hard enough building a dream into reality, then having a spouse or significant other shoots it down right before your eyes. The most rational thing to do is talk about it beforehand. Getting your partner on your side early and getting them to see the big picture is worth all the time invested. My first business partner/wife supported the dream for 21-years before she passed away with cancer; however, within that time, she did see the dream materialize from zero into a six-figure enterprise. Now mind you, it was not all cake and honey at the beginning but the point of staying focused, and on one accord in time, it all worked out.

The spouse can be a resource or a constraint on the new business due to the intertwining of family and business interactions. The continuous investment in the enterprise by both members is constant. The inability to make family outings can, in time, havoc within the marriage. The question is, will the couple be able to overcome? However, it is possible with communication and a combined commitment to their future.

2. Types of Business Models

There are many types of business models in the marketplace; the question here is to find one that matches one’s business persona. The main one I have used over the years is the principal and agent/agency concept. What makes this so unique through the contract the agent/agency is representing its principal that same way the principal could do for its self, and generally without a financial commitment, but delivery a service in exchange, such as marketing for a commission or fee. Thus, a  great way to be in business with an organization as an independent contractor; whereas, the agency provides the tools and the how too, and paid for what one does.

The principal and agent/agency concept work smoothly into the consulting business model. Having a Doctorate in Business Administration with a particular focus on Entrepreneurship and Business Management and an M.B.A. and a Bachelor’s in Marketing, and seen as an expert in the field of business.

3. Personal Service Sector

The Bureau of Labor Statistics (BLS) defines any industry that is not in the goods-producing sectors such as mining, construction, or manufacturing would be, listed as the service sector or that of wholesale and retail. The service industry is a low overhead industry and employs 112.8 million people or 77.2 percent in the U.S. economy and their expenses controlled. Thus, many entrepreneurs could operate out of their own homes in the service sector. The entrepreneur starting-off should try to keep their overhead down use their home temporarily until the cash-flow can support the overall business they can contemplate moving to a commercial building when that time comes. The service sector is so strong it off-set the trade deficit in the United States to a trade surplus of $152.4 billion, which is about 23% of all goods traded.

4. Studying Business Trends

Research is essential in business; the understanding of trends and how to employ them in one’s venture can save a company from financial disaster. Such as access to capital is considered a top restraint to that of current business activities for men and women. Since the Financial Crisis of 2008, banks, for the most part, have tightened their lending to small business enterprises. Nevertheless, alternative financing has surfaced to handle some of the short-falls of traditional lenders with programs that are focused on entrepreneurs by entrepreneurs that lower or eliminate collateral from entrepreneurs, especially to the service sector, how traditional entrepreneurs don’t have many assets. The top 3 reasons for starting your own business are (1) to be your own boss, (2) to have a more flexible work schedule, (3) to make more money.

5. Businesses of The Future

Why get involved in a me-too industry? Why not something that is futuristic and will be around for the next foreseeable couple of decades or more? Do the research and find a sector that is unique and profitable for many years to come. What about developing a patent, and if too expensive to manufacture, then license it to some firm who can, and you receive continuous royalty fees on your patent.

6. Prospecting

Knowing how to prospect is another essential part of the business. If something is not sold in the industry, the company will close eventually, due to the lack of sales. Entrepreneurs that lack this skill-set will find it hard to prosper and make a profit. The entrepreneur must know who their ideal prospect is and develop a persona of this candidate and put it in a tracking system retrieved at a later time.

7. Customer Relationship Management (CRM)

The Customer Relationship Management System (CRMS) is an automated system that keeps one’s contacts, prospect, or client in a systematic way of retrieving and recording for future events. Without such a tool in one’s management arsenal, it would be problematic in managing one’s business affairs. The CRMs purpose is to have in one place data on a customer from last contacts or history to what has been done in the past to bridge the gap on where one is now with the customer. Information is essential in business, and being able to research one’s customers gives the organization a competitive advantage over its competitors. This data is vital when communicating with a prospect or customer and bring credibility as a professional when addressing the source.

8. Personal Selling

We all sell. Babys learns that when they cry, they can get something, such as food, attention, or this is their way of telling you something is wrong with them. Persuasion is a form of selling to get others to go along with a suggestion they may have over others, such as an event or a business proposal. The creation of value for another that can use for the company for them in some way to benefit from the offering for the company’s sake. Personal selling is a people business whereas, the salesperson interacts with other people through some form of communication, be it face-to-face or teleconferencing to handle some problem the prospect has through a presentation that has benefits of solving their prospect problem.

9. Education

Entrepreneurs wear many hats. The lack of knowledge of vital essentials to operate a business is no excuse for the entrepreneur. The success or failure of the venture sits squarely on the shoulder of the entrepreneur and no one else. It is up to him/her to have the knowledge of administrating the various functions of the business that it works smoothly with other divisions and turns a profit. The entrepreneurs must be cognizant of their skill-sets to manage the enterprise in a fluent manner that complements the whole of the organization that is functional at all times.

There are many ways the entrepreneur can acquire an education; one way is through the internet with universities who have degree programs that the entrepreneur can work on his schedule around his commercial undertaking of being an entrepreneur. Small Business Administration has programs that can assist entrepreneurs in the management and operation of start-ups operational, growth, and finally, exiting the enterprise to retirement through the sale of the venture to another. Then there are other resources such as trade associations, local Chamber of Commerce, just to name a few places where entrepreneurs can go to further their education in the business world.

10. The Need for Entrepreneurial Marketing

Thus, marketing is distinctly different from sales. Marketing is the procedure of planning and executing a concept of pricing a product or service, the distribution of some idea or service, or the purchase of goods to create an exchange that will satisfy the prospective organization and the concern of the entrepreneurs firm as well. Marketing is a functional department and is similar to that of finance, accounting, human resources. Now entrepreneurship is not a business function like marketing; as such, it is a managerial style in business. Both marketing and entrepreneurship based on the customer is the central part of the company; all focus is on the customer’s satisfaction and the delivery of value to their liking and benefit of their organization.

Conclusion

As have been noted, there are many moving pieces in the business ecosystem, and without good managerial practices, businesses will fail. This concludes Part VIII on “Why Do Businesses Fail? Moreover, let us know what you reflect in the comment section. We do value your comments.

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