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October 23, 2005
Why Companies Which Should Make It, Don’t
Jeff Cornwall offers an outstanding blog on small business and entrepreneurism, all while teaching and running the Center for Entrepreneurship at Belmont University in Nashville, Tennessee.
One of Jeff’s guest lecturers for a recent class was Bobby Guy, a bankruptcy lawyer, with Waller Lansden, who outlined the top ten reasons "why companies that should make it. . . don’t":
- 10. Over-expansion. The need to get there first or to demonstrate revenue growth to anxious investors leads businesses to grow too fast.
- 9. Poor Capital Structure. Companies take on too much debt....Enough said!
- 8. Failure to Control the Controllable Costs. Businesses spend down the initial cash before it is flowing in at a positive rate.
- 7. Failure to Prepare for Volatility of Uncontrollable Costs. For example, energy, materials, labor, or insurance.
- 6. Add New Products or Divisions that Drag Down the Profitable Ones
- 5. Poor Internal Controls and Execution -- customer service, accounting controls, theft, fraud
- 4. Poorly Designed Business Model
- 3. Reliance on Critical Financing that Dries Up
- 2. Failure to Adapt to a Changing Market
- AND THE #1 REASON? Management in Complete Denial......
My own observation is that reasons 2-10 are typically, in some manner, a result of reason number 1.
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Comments
I could hardly wait for the punch-line. Forget 2-10. It is all about #1. If you cannot engage with reality, then you're sunk. One of the easiest ways to stay suitably disengaged is to consistently listen to only the same set of people. If you do decide to expand your circle, then you'll want to have some handy stories to tell yourself about why people who don't agree with you just don't get it.
Works every time.
Posted by: Coty at October 24, 2005 10:22 AM
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