Avoiding Failure in Our New Business
In order to avoid failure in this new business venture, we must implement a plan of action to avoid the four main failure mechanisms of small business. The three managers and twenty employees will work along with the owners in order to ensure success. Never, under any circumstances, will we accept mediocrity.
In order to avoid managerial incompetence or inexperience, we will enlist the help of a professional staffing service in order to recruit and retain high-quality employees. The three managers will be required to have a four year degree in business as well as three years of experience. Ten plus years of experience in management may be accepted in lieu of a degree. Managers will be carefully screened and must pass a criminal background, credit, and test. Also required, to ensure the ability to work with employees, management candidates will be subjected to a personality compatibility test.
In order to avoid neglect, each member of the business will be responsible for monitoring peer performance as well as maintaining a high standard of performance themselves. Management will be subjected to a system of checks and balances and the owners will hire an outside auditor once a year to ensure that there is no neglect. All of our assets, personal and otherwise, will be protected at all times and at all costs. Because of our joint ownership, we decided not to form Limited Liability Company (LLC). Because we are not an LLC, the personal assets of our owners the business must be protected, keeping it clear of debt and free from lawsuits. Establishing and keeping competitive edge is another thing that will help us avoid neglect. We must always stay ten steps ahead of the competition and never get comfortable with our position in the market.
The issue of weak control systems will be avoided by implementing a strong system for internal cash management. Practicing the five basic principles of cash management until it is habit will assist the accuracy of our business.
In order to avoid insufficient capital, low levels of inventory will be held and assets will be kept as liquid as possible. Cash on hand will be invested and the debt to asset ratio will be kept under fifteen percent. Investor’s money shall be used sparingly and will be able to be accounted for at all times. An external audit shall be conducted quarterly for the first two years in order to verify that insufficient capital is not a looming issue. One measure already taken in avoiding insufficient capital is the other owner and I saved for years before pooling our savings with the savings of a small group of investors to start the business. It takes the average business two years to see a profit so we have ensured that we have sufficient capital to last until we being to see profits.
To conclude, small businesses open and close everyday and the failure rate is double the success rate. We do not wish to be a statistic. Instead, we wish to be a successful business and experience a high growth rate so that we will be able to offer our employees better benefits and a high quality workplace.
References
Pleshette, L.V. 5 Money Keys to a Successful Small Business. (79) PowerHomeBiz.com
(2004)Ten Tips for Starting and Running a Successful Small Business.