Nobody starts a business with the intention to fail. When starting a new business, the last thing one wants to focus on is failure. In fact every start-up entrepreneur is zealous to succeed at all cost – therefore failure is the last thing on the mind of a start-up. However due to both controllable and uncontrollable circumstances some businesses die out with time.
Why Businesses Fail
It is a well known fact that a significant percentage of new businesses fail along the line. This can be attributed to the fact that many entrepreneurs run their businesses under poor management.
New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. Unless they recognize what they do not do well, and seek help, business owners may soon face disaster.
Lack of planning can lead to the failure of a business. As the saying goes “If you fail to plan you plan to fail.” Most business owners do not have a business plan as a blueprint to work with so they work in isolation and end up failing along the line.
Insufficient capital can also lead to the downfall of a business venture. This is a common fatal mistake for many failed businesses because they underestimate how much money is needed to start the business and are forced to close before they even have a fair chance to succeed. They also may have an unrealistic expectation of in-coming revenues from sales.
Philomena A. Debrah a.k.a Yaa Asantewaa, Managing Director of Philio Delio Smile Foods, producers of Yammi Instant Gari Mix, said her business almost collapsed as a result of low capital.
She said it was very difficult for her to obtain resources to start her business because all the banks and financial institutions she contacted for assistance were not interested in helping start-ups.
Yaa Asantewaa, who use to trade in commodities like rice, sugar and oil, said if she had not saved some money from her previous trade, her new business would have collapsed outright.
She said, “I started my business on a small-scale and wanted a loan to expand it. If I had not saved money from my earlier business, my new one would have failed instantly.”
She noted that the attitude adopted by some financial institutions not to assist start-up entrepreneurs was very disturbing and need to be critically looked at.
She indicated that “if these institutions are saying that they do not give capital to start-ups, how then can the entrepreneur start on his/her own and later come for assistance to continue. I really think they should rather help nurture entrepreneurs in the manufacturing sector because most of these people are full of innovations and creativity, and they really know what they are about.”
Anthony Agyemang, who owns a fruit juice processing factory in Accra, also recounted that he virtually had to shut down his factory about seven years ago due some challenges he faced along the line.
Explaining the reason behind this situation, Mr. Agyemang said he overlooked some basic business principles at the time he set up the business.
He said, “I did not start my business with a business plan because I had capital and access to raw materials, so all I had to do was get a few unemployed people I knew and start running the company.”
He explained that he did not also create a separate account for the business and added the profit from business to his personal account. With time the business started experiencing financial challenges so he had to lay off some workers at a point and eventually had to close down the business.
With assistance from his wife, Mr. Agyemang was able to secure a loan facility of about GHC50,000 in 2006 from the bank to revamp his business.
He noted that his investment would have gone down the drain without the intervention.
Reviving the business
Like most entrepreneurs, you did whatever you can as an owner to save your business. You did a huge marketing campaign to push your business up, you downsized some of your worst performing employees, and you even tried to find other revenue generating avenues to keep your business on its feet. But still, your business failed – sales declined, profit dropped, your customers just did not want to come. But thankfully, there is always a way around every problem.
Before doing anything, the first thing one has to do is to be honest and make a good assessment of the business. It will be important to conduct a SWOT analysis if you like.ie Strength, Weakness, Opportunities and Threat analysis. Understand both your strengths and weakness to identify how you can plan your revival strategy.
Being completely honest with your assessment will help you know exactly the reason why the business might have failed or is failing. You can hire the services of an independent auditor to give you an honest to goodness indication of how things are. After that, you can now develop your plan.
Evaluate your problems – analyze your situation to determine if your problems have solutions. Develop a plan – create a restructuring plan with which to grow your business and consolidate it. Share the plan with your staff and important third parties, including your creditors and vendors. Realign your team – restructuring should include reorganization of your employees. Start at the top with the evaluation of your management team and work your way down the company. Replace weak members of your team.
Restructure your debts – use the restructuring process to put your finances in order. Take out new loans, if necessary, to fund restructuring, but work with your accountant to make sure your fiscal plans are sound.
By Esther Awuah