Back in the early 90s before all of our trainees were born and Bill Clinton was trumpeting something called “The Information superhighway” (the Internet was not a word we were familiar with for a while), the UK economy was starting to recover after a brutal recession.

Thousands of companies had gone bust, unemployment peaked at just over £3m and the new term we all got used to talking about was “negative equity”, where the value of someone’s house was less than the amount outstanding on their mortgage.

At the time, a huge study was undertaken to identify the ten most common root causes of small business failure. This is not always easy to identify and a bit of digging is required. Directors of companies that have gone bust rarely tell the truth (even to themselves) about the root causes of the company failure and usually attribute it to external forces. “It was the taxman who closed me down” – even if they only closed the company down because the PAYE hadn’t been paid for two years!

This study identified the ten most common root causes of small business failure.

Over the years, A4G have used this study in a number of ways, in particular as part of our “One-hour business troubleshooter” sessions with clients who are struggling or as part of the “Ten vital ingredients for a successful new or emerging business” for new enterprises.

We’re now using many of the lessons we have learnt from previous work on these ten issues to help current clients. As I said in last week’s Friday night email “We’re all fast growth startups now”.

Over the next ten weeks, I’m going to focus on one of those issues per week in amongst the usual reflection of the challenges that week for owner-managed businesses.

The first of those ten vital ingredients is: A clear vision by owner or owners.

Many people start their business without a clear vision of where they want to end up but with a clear vision about how the business should operate on a day to day basis. By doing the right things day in day out, the business grows and success results. I call these my “accidental millionaire” clients although the reasons for the success are certainly not an accident.

As time goes on and the market and environment changes, it’s easy for a business to lose it’s way. Taking some time out from the day to day routine to get a clear vision of where you want the business to be can be critical.

You can do this stuff on your own (although it’s hard without someone to bounce it off). There are four key questions:

1. In an ideal world where do you see your department being in two years’ time? 

In normal times we would work to a five-year plan but in this situation, two years is more suitable. A friend of mine who was doing this stuff long before I was, once asked that question to the wife (I think her name was Barbara) in a husband and wife company and the answer was “not married to Colin” (her husband obviously).

Awkward.

In one other case, one director wanted to be manufacturing the new product he had spend hundreds of hours developing and the other director wanted to just make enough profit to be able to sell the business and retire.

They argued for a bit and settled on “we’ll start manufacturing when the company is stable”. They both sat back in their chairs happy to have agreed.

“Hang on” I said. “Define financially stable”.

The inventor director said “when there’s no-one banging on the door demanding money”. The other director said “when we are drawing £100k net of tax each and have £250k in the bank”.

Having two owners with conflicting visions will simply mean that you will spend the next two years working against each other.

2. In comparison to where you want to be, where is it now?
“A complete and utter bloody shambles” replied one client when I asked this question.

This came a surprise to me because I’d always considered them to be a fairly well-run company. But what I learnt was that whilst their finances and accounting records were well organised, the day to day reality of their business was indeed a “complete and utter bloody shambles”.

Deliveries went to the wrong customers, orders were lost and it was only because they were in a fairly niche industry that they managed to survive some of these disasters. Oh that and the fact that the majority shareholder ran round the place from about 7.30am until 6pm every day preventing one crisis after another.

That may ring bells for some of you.

3. What do you need to do in order to get from where you are now to where you want to be?  

Our usual experience of asking this question is that the answers come flooding out. The owners and managers usually have lots of answers and ideas.

But the problem is that there’s only one thing you can do next. So you have to get them in the right order. Plus, there is also the problem that some of those solutions won’t work. A good facilitator can work through these points.

But the detail can come later. Because everything identified at stage 3 will end up dying peacefully and forgotten in the graveyard of good intentions if you can’t get to the right answer to question 4.

4. What is stopping you from doing those things?

There are a lot of possible answers to this which I would refer to as limiting factors. We have covered these in our video “The 60:30:10 rule of growth” (which was supposed to be linked from last Friday’s email but that’s another story. Anyway, it’s online now and you can not only get some food for thought about how to tackle those limiting factors but can also be reminded of what A4G’s Managing Partner looked like when he used to wear a tie.

Most limiting factors can be tackled although the trickiest one is the old “hours in the day” answer. That’s much harder. What got you here won’t get you there and if you’ve furloughed too many staff or made them redundant, hours in the day might be a problem now even if it wasn’t previously.

If that’s an issue, can I suggest you consider the fact that the Summer of 2020 will be the best time this century (and maybe last century as well) to recruit a school or University leaver? If you don’t know how to go about recruiting someone for their first job email our HR Manager donna.bygrave@a4g-llp.co.uk for some tips.

The remaining answers at this stage rarely make sense. That’s because they’re not true. The real answer if often “because I don’t want to do that”. That’s tricky. Your comfort zone is often the biggest limiting factor of all and probably the thing stopping you from having the business you want.

I could write about this stuff for hours because I and my team at A4G love it.

We love helping clients overcome limiting factors, we love putting systems in place to make your business less dependent on you and we love a profit model that can be used to help you decide what you need and don’t need to re-launch (or even whether you should hold off re-launching at all), create targets and budgets to go in your accounts system and key performance indicators that you can measure every week as your business starts to re-build.

We’ve built all this into the A4G Breakthrough Recovery programme and you can get more details by emailing your principal Adviser or enquiries@A4g-llp.co.uk.

But that’s enough of my shameless sales pitch. There’s lots to do this weekend. You still haven’t finished all those DIY jobs you planned to do, the kids haven’t done the work their teacher emailed them and are now demanding to go to the zoo and you and your spouse still haven’t agreed which of your divorced parents you are going to invite into your Boris-approved social bubble.

Decisions, decisions.

Have a good weekend.

Contact me today!

Malcolm Palmer

FCA

Managing Partner

01474 853856

Send me a message

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