Why businesses and leaders fail

I had a Zoom meeting last week with Sally (not her real name) to talk about her business, which she had started a couple of years ago. At one point of the conversation, Sally said that she was making $2,000 a month but needed to be making $5,000 from the business. Luckily for Sally her husband was supporting her in her venture from other family income and so she wasn’t in dire straits. The more we talked, the clearer it became that Sally was suffering from one of the five reasons that many organizations fail. These five reasons are:

1. Lack of planning: It is amazing to me after working with hundreds of businesses and their leaders, how many fail to plan. Some businesses are conceived on the back of a napkin over a coffee and that seems to be the extent of planning. However, successful businesses that outperform their competitors, plan on a regular basis. When contractors build a house, they are continuously looking at the detailed plans to ensure they get it right. Most entrepreneurs build a business without a clear concept of what they are building and their employees flounder because they too, are unsure of the purpose of the business. is. Annual planning supplemented with quarterly planning can work wonders for floundering businesses.

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2. Leaders are caught up in busy work: Many leaders are overwhelmed with a flood of interruptions because they don’t schedule their week. As a result, they get caught up in the weeds of the business and are constantly doing work that doesn’t have a high value for the organization. When we can block time each and every week for doing highly important work that moves our company forward, we have a much higher chance of being successful.  

3. Lack of profitability and understanding of where the money is coming from: Sally’s business is marginally profitable. In other words, she could make more money doing something else. Luckily for Sally, it isn’t just about the money. Sally loves what she is doing and is passionate that her income will eventually rise to the necessary level. However, most businesses don’t have the luxury of not having to be profitable. Having lost $272,000 in 1999 in the start up of a business, I understand clearly the need for making a profit to ensure the longevity of a business. Without profits, businesses can not pay their employees, serve their customers or give back to the community. Without profits, business owners have nothing to show for their efforts when they want to retire. There are seven areas in any business that contribute to profits and profitability and without a clear understanding of these areas, and knowing which part of your business is bringing in the money, business leaders are bound to fail. 

4. Lack of value to customers: When businesses fail to deliver value to their customers, they are on a slippery slope heading for disaster. We need to constantly ask ourselves and our customers if what we are doing is important enough to justify our stakeholders support. Unfortunately, we are so focused on worrying about ourselves that we forget our customers, the most important part of our business, . 

5. Too few systems: When everything in the business revolves around a single person or just a few people, that organization has a shaky future. When we build systems into the business that ensure that things always get done exactly as expected by the leader, the business doesn’t need leadership to approve every decision. Systems ensure accountability to meet objectives allowing leaders to focus on the big picture and the future success. 

In my discussion with Sally, we were able to get some clarity about her challenges and while it may take her some time to adjust her business so that she can get a decent income, she understands what she needs to do to achieve her desired outcome.

- Dave Fuller, MBA, is an Award Winning Business Coach and the author of the book Profit Yourself Healthy.  Struggling to succeed? Email dave@profityourselfhealthy.com

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