Keys to Avoid Small-Business Failure

In beginning this small business with a longtime acquaintance, it is worth developing a plan of action for the purposes of preparation and referral so that we are not only cognizant of the potential pitfalls we might face as a burgeoning organization, but also so there is a point-of-reference as we build and hopefully, grow into seeing solid profits. There are four issues that must have contingency plans associated with them. These issues include matters of managerial incompetence, neglect, weak control systems, and insufficient capital to grow and run the business.

Since we will be hiring three managers with start-up capital, it is imperative that we make a decision based on experience and potential as well as hire managers who share our vision and are thus inspired to grow with our organization. "Most small businesses have very limited resources, like money. It is, therefore, critical these limited means be skillfully used...Most managerial incompetence is a combination of a lack of skills and a poorly-defined purpose" (Sherlock 2007). It would be far too easy for us to attempt to secure managers who are out of our price range, thus we must seek highly-qualified managers who may not have as much experience as former upper-management hires but who have unique skills and potential that can be utilized in a way that fosters the sense that they are getting in on the ground floor of a promising future.

This will require not only attention to start-up costs when hiring these individuals, but more importantly, extremely cautious interview processes that delve deep into what past experiences these managers do have to see if they have talents that we can hopefully reward in the future. Since this new business is invested in inspiration, we must offer incredibly motivating rewards incentives if the business succeeds, both in hopes of motivating and down the road, retaining and fostering this managerial talent. Since managers are such an integral part of this organization, especially since organizational duties will be important with the process of starting up, we must plan on devoting good resources toward good people whom we feel confident will help us reach our goals.

There is a need for a contingency plan regarding neglect, especially since this organization will require management skills from those we have hired and a brand new set of employees. Since we are both deeply and personally committed to the growth and success of this business, we must make certain that we do not take over and leave our managers and employees feeling as though they are vestigial parts of the organization. It would be far too easy for us to do a lot of the beginning work and then suddenly sit back and let it run itself and therefore, we must plan on not doing this, on staying committed but more importantly, we need to make sure everyone involved has a vital role to play-one that can be sustained year after year. Starting a new business takes a great deal of time but by sharing responsibility, delegating effectively, and making sure that no one is under-or overworked, it will be possible to avoid the possibility of neglecting the business and forgetting our initial inspiration.

One of the primary aspects of this business we must develop is a strong control system. We have far too many new people coming in and with a business so small, it is predictable that many of these new employees and managers will be given a great deal of responsibility in terms of data, our products, and access to funds and customer information. As a result, one of the greatest costs we can anticipate is the implementation of a strong system of controls that regulates exactly who has access to what aspects of the business and a reporting procedure that is, in effect, a checks and balances system to ensure that this is impossible for one person alone to exploit any breeches in the developing system. Preventing weak control systems is something we can begin right away by consulting with IT professionals, tax and others but ultimately, it will have to be the subject of ongoing scrutiny. As a result, I propose that there be monthly meetings at all levels discussing control systems and reinforcing how seriously the matter is viewed in addition to more physical controls, technological, accounting, security and otherwise.

We must go into this venture with the realistic understanding that capital is going to remain our biggest issue, especially in the early days. "Many would-be small business owners launch their business with the idea that they will acquire the resources they need to run the business and the business grows. The problem is the business may never grow because it is under-resourced" (SurePayroll 2007). Our contingency plan in terms of capital is going to be simple. We do not buy what we cannot already afford with a budget comprised of earnings of a most dismal projected first-year. While we may initially consider small business credits, if we are unable to secure loans with reasonable interest rate, we stay out of debt entirely. We raise the money for the business on our own with a great deal of caution but do not borrow. This is a recipe for disaster. We cannot simply assume that by putting out a product people will automatically buy it, thus we must at first treat this nothing more than a calculated risk. While we cannot afford to cut costs on security, management, and other vital details, we will remain as small as possible until gains are steady.

By being careful and understanding these important aspects of why businesses fail in addition to having an active contingency plan or course of action, we can make sure we make it past our first year and see gains. Many of these issues are more about prevention than actually getting into one of these situations and finding a way out. Thus, we are armed with knowledge-our single greatest ally in small business success.

Works Cited

Sherlock, Joseph M. (2007). How Not to Fail. Retrieved December 11, 2007 from http://www.scorevancouver.org/business-tip4.html.

SurePayroll. (2007). How to Avoid the Pitfalls of Starting a Small Business. Retrieved December 11, 2007 from http://www.surepayroll.com/spsite/resources/articles/starting/starting2.asp