News item: Business bankruptcies jumped by 17 percent in the second quarter of 2008, higher than at any time during the past two years, according to McClatchy Newspaper analysts. From April through June, over 15,000 U.S. businesses ceased operating, with the most frequent filings in Delaware, Montana, Oregon, Maryland, and Connecticut, according to an Oklahoma City data company (Automated Access to Court Electronic Records).
Analysis: The weakest in the herd are the ones which fall to predation the fastest.
Discussion: During boom times, egregiously bad management somehow manages to stay afloat because the water is so buoyant. (I’ve seen this repeatedly in my consulting career.) During “average” times, many of the weaker entities go under. And in tough times, most of them do. (Except for government organizations, which simply use up more good tax money to support lousy leadership.)
Taking it to the solo practitioner level, you have to be strong in ALL times, meaning you have to utilize sound business practices, so that you’re not lingering at the periphery of the herd with a sore foot, an empty stomach, and a cheetah drooling at you from the bush.
Want to sharpen up your solo operation? Here’s how to be a herd leader or, better still, over the horizon and way out in front:
1. Use sound fiscal practices. Deduct all that you legally can using pre-tax money. Have a smart accountant and attorney, who understand professional services practices, help you organize in that way. Stay on top of all receivables. Remind your buyer, not the lower level accountants, when a payment is overdue. Maintain a cash reserve and a substantial credit line with your bank (which you should pay down to zero when conditions merit).
2. Use smart business acquisition practices. Cold calling doesn’t work in this business, sorry. (Do YOU buy things from people who call out of the blue? If so, that’s part of your problem.) I don’t care who tells you they solely cold call, and I don’t care if you hit one in a thousand. You must create a “marketing gravity” to entice prospects to come to you, so that proving your credibility and even explaining your fee are not the key considerations. Build an expertise and intellectual property that are irresistible.
3. Use intelligent help. Too many consultants insist on making mistakes that others have already made—sometimes 20 years ago. Find people who are smart and successful and learn from them.
4. Use a support system. It’s tough to have a lot of confidence if your own personal relationships aren’t working. Whether family, friends, or colleagues, build a trusting support network which can help you with your objectivity.
5. Use your head. You can’t make $10,000 a week by addressing envelopes at home, or by taking part in a “multi-level marketing effort,” or by allowing some broker or agent to represent you. Nor can you learn from those who haven’t been there and done it themselves. It’s forgivable to make personal errors when you’re in the trenches, but it’s unforgivable to listen to the hot air and poor advice of those who have never been in the trenches (and succeeded).
The businesses going under were weak to begin with. Tough times merely accelerate their demise. You need to be strong at all times. There are people having banner years right now, in the midst of all the turmoil.
Are you one of them?
© Alan Weiss 2008. All rights reserved.