Knowing why businesses fail can be just as important as knowing why others succeed. Hearing success stories can be really interesting and entertaining. Those who succeed always have them and they tend to be these glossed over stories on how, they simply over came obstacles and worked hard. However, the law of averages states there will be more business failures than successes, yet people don’t like to talk about them. They tend to deal with their failures in private and try to quietly move on. In this discussion on the Gopher Lawn Care Business Forum, we talked about our experiences of seeing businesses fail and why they failed. These stories should help you keep your eyes open for signs of upcoming problems.
One lawn care business owner wrote “I have seen many, many, many good businesses fail.
Generally it is due to a few simple errors. The tops ones that stand out in my head are, not sticking to a financial plan, poor financing, lack of working capital, or marketing research was off.
The #1 issue that I have seen kill a business is growing too fast, spending way beyond the means of the cash flow, and borrowing without thinking it through.
It’s a delicate balance and it takes a lot to make a business successful. As an owner you have to have a big tool box of skills to pull it off.
1. One business owner I knew started a personal protection business selling personal protection devices. He bought a great deal of tear gas devices. Some on key chains and others that were larger. His demand was great. Unfortunately, he didn’t check the business out before jumping in (he spent about $2,500.00 on product) only to find out they were illegal in the state. His marketing program directed the police right to him. He was forced to shut it down.
2 A second started a disc jockey business. Started out with plenty of small jobs. Did wedding receptions, parties, etc. Unfortunately because of a previous addiction and legal problem, he could not run a business anywhere they served alcohol. This severely limited his options and ultimately led to him closing the doors on the business.
3. A third started a house cleaning and maid service. At first she did all jobs herself but soon grew beyond her capabilities. She set up a second service vehicle and then a third. Financed the best of the best equipment and hired personnel. She was not an organizer and a poor judge of people. Both of her new workers were caught stealing! She never recovered.
4 A fourth was a CPA. He had the training, the credentials, knowledge. But, he was not a go getter. He couldn’t manage his time, or his lack of ambition. He is still a CPA today but he now works for someone who tells him what and when to do the work. He was opposed to working more than 40 hours per week especially for himself.
5 A fifth - Quick Oil Change business. He took over his father’s repair shop. Saw quick easy money doing oil changes. He was lazy! He opened about noon and rarely ever stayed after 5pm. If he wanted to go hunting, well, he just didn’t open. Missed appointments, turned business away if he thought it was getting late, and never opened on Saturday. He had the business but didn’t capitalize on it. By the time he paid his utilities, insurance, taxes there was nothing left.
6 sixth - An electrical business. The owner was a realÂ go getter and would work until he dropped. He had a great personality. But he lost his business, home and eventually his wife left. His issue was quite simple, he could not say no, and got in over his head. His receivables were out of control and all the money that was promised him, never came.
7 seventh - A deck builder. He bought so much equipment the first year of business. He didn’t plan for the winter months, had no cash, lost everything.
Most all of these business owners did not have the mindset, the ambition, or the commitment to run a business. You have to research the business, investigate the people you hire, be committed, and be willing to put in all the extra effort required. Running a business isn’t a 9 to 5 operation. To be successful, you need to continue your education, emulate those who are successful, and align yourself with other such businesses. Lastly, you have to remember, you are in business to make a profit, so make sure you get paid.”