By far the most common [business mistake], in the UK at least, is not brought about by doing something but by doing nothing.
Sir John Harvey-Jones

THE IMPORTANCE OF BUSINESS SKILLS

While there are always exceptions, most owner-managers are in business because:

• they went into an existing family business or
• they were good at doing something or selling something and they decided, or were forced by circumstances, to go out on their own.

Neither type of owner-manager will generally have had any formal or structured training in how to manage all the different aspects of running a business, or will even have been advised or will have realised that such training might be useful or necessary.

Very few people are skilled in all the things necessary to run a business. It is simply human nature to have a personal preference for, say, the selling of what you ‘do’ or the doing of it. That is probably why you went into business in the first place and these are, of course, the things that bring the cash into your business.

But when running a business, simply doing the work is not enough. Once you are your own boss, you very quickly find you are your own bookkeeper, sales exec, production manager, secretary, post-clerk, coffee maker and office cleaner, free to set your own hours and to work for whichever 24 hours a day you want to. When you look at the way many owner-managers carry out the necessary business functions, such as planning, doing the accounts, cold calling for new sales or managing people, many of these tasks are often done poorly, if at all. This is because business owners either do not like or feel confident about the job.

The problem is that, when times are good these weaknesses may not be critical to the business’s survival but, when times get tough, they may prove fatal. A lack of functional skills (e.g. in pushing hard for sales, in managing the cash tightly or in cracking down on inefficiencies or slack in the staff) can be what pushes your business into difficulty in the first place. Worse still, if you have had no formal training in all aspects of business management, you will have had no training in what to do in situations of real trading difficulties or crisis.

No one starts out in business to fail but, for various reasons (see Chapter 4), failures do happen. The skills needed to deal with business difficulties are vital because failures are not, generally, inevitable. Most failures happen largely because the business’s managers have allowed the situation to deteriorate over time and are then unable to manage through the resulting crisis.

Time and time again, business people who have set up, run and nurtured a successful business, fail to save it when it gets in to difficulty, largely because of weaknesses in their situational skills. These are the knowledge or techniques required so that managers can recognise, face up to and address the situation whilst ensuring they protect themselves from potential personal liability. These weaknesses fall into three areas:

A lack of training in the specific skills and knowledge needed

If you have only ever managed a business that has been growing, you are unlikely to have used or to have acquired the situational skills needed to cope with the specific requirements of a crisis.

For example, you are unlikely to know how to make redundancies, or manage the bank’s concerns or estimate the risks of wrongful trading.

A lack of ability to deal with a crisis

If a business is to grow strongly through new sales, some of its managers must have good sales skills. As a businessperson you will appreciate that this is largely a matter of horses for courses:

• Some people have a natural aptitude for these skills.
• Others can improve their skills with training and through experience.
• Yet others will simply not have the aptitude to develop those skills in the first place.

You may be lucky and find you have a natural aptitude for dealing with a crisis, but don’t rely on this!

A refusal to seek help from specialists

When your home is burning down, you call the fire brigade because they have the equipment, the resources and know-how to deal with such a crisis. The same applies in business. You will need expert help.

MANAGERS ARE CRITICAL IN A CRISIS

What really makes the difference in a crisis situation is how you act. You will need to ‘make something happen’ by either dealing with the problems or by getting help before it is too late. All too often the first real help a failing business receives is from an insolvency practitioner (an ‘IP’) who has been introduced too late, only to find one of an assortment of management animals has been at work while things have been getting worse.

If you want to survive, you cannot afford to be any of the following.

A goldfish

A goldfish simply doesn’t realise there is a problem until it is too late.

An ostrich

An ostrich won’t face up to how serious the problems are, preferring instead to believe that everyone else in the industry is doing badly or that, if only the bank would lend another few thousand, all would be well.

A rabbit in the headlights

A rabbit is frozen into inactivity by:

• fear of the inevitability of the impending crash (a self-fulfilling prophesy if ever there was one):
• an inability to face up to doing what needs to be done to save the business, be it cold calling for sales, getting the books up to date or making redundancies;
• paralysis through analysis (‘should I do this or that or the other, and what if...’);
• paralysis through advice (unable to take any action before checking it with a solicitor).

A headless chicken

A headless chicken rushes around making lots of noise and scratching at anything that crosses its path, but it is unable to focus on taking the structured actions needed to tackle the real issues.

The management animal you need to be is the sheepdog, remaining in control of the situation, identifying the actions required and staying focused on achieving your objectives of herding your business around the obstacles and distractions back to the safe path.

WHAT TO DO IN TIMES OF DIFFICULTY

There is no shame in your business getting into difficulty. All businesses have their ups and downs. What you must do, however, is the following.

1. Spot the signs as early as possible

Business failures are like smouldering fires: the earlier they are detected, the easier they are to deal with because you have more time and resources to devote to dealing with the problem. The longer you delay, the more the fire takes hold, the stronger it burns, the more resources it consumes and the less you have to fight it with.

Use this book as a smoke detector so you can recognise a deteriorating situation as early as possible, the options available to you and how you can formulate and implement a turnaround plan, getting in expert help as early as possible.

2. Face up to the need to deal with the problem

When you face up to the situation you will be able to:

• assess the causes and seriousness of the situation;
• understand the options open to you;
• plan your strategy; and most importantly of all;
• make something happen.

3.Get help

Get in all the help you need.

4.Remain alert

Once the fire is out and you are rebuilding your business, do not forget to use the techniques in this book regularly as a smoke detector to check for the first warning signs of possible future smouldering fires.

The book offers practical help and information in four sections, covering:

• (i)analysing the symptoms and causes of difficulty;
• (ii)stabilising your finances;
• (iii)setting your strategy; and
• (iv)making it happen.

The action required will have to be tailored to the needs of your business. This book will help by giving you the diagnostic tools needed to ensure you take appropriate action for your specific business. It will also assist you in keeping your business healthy in the future by helping you to think strategically, and it suggests techniques you can use so you can take time out regularly to work on your business as well as in it.

TAKE THE TIME TO DO A BUSINESS HEALTH CHECK

Answer the following questions with either a ‘yes’ or a ‘no’. Put each question into the context of your own business: does this apply to us, yes or no?

	Do we have a problem with this?
1. Is our industry, sector or market going through significant change?	Yes/no
2. Do we have difficulty in saying what is really different about us – what makes people buy from us rather than our competitors?	Yes/no
3. Do we lack a clear vision/strategy (are we missing a map of where we are going)?	Yes/no
4. Are we overconfident (do we have an unrealistic map)?	Yes/no
5. Are we failing to invest enough for the future (e.g. in training our people; in upgrading our processes and in spending on capital equipment, product development, new products and marketing; or in building up financial reserves by leaving sufficient cash in the business or obtaining facilities or investment)?	Yes/no
6. Do we have a management team that is weak because it is missing key functional skills (e.g. a finance director), personality types (e.g. an ideas person) or that has problems due to the personalities involved (an autocrat in charge, conflict between key staff)?	Yes/no
7. Is the business going through a major change (e.g. high growth, a move of premises or a major acquisition) that is stretching our management and/or financial resources?	Yes/no
8. Are we failing to face up to necessary changes (e.g. succession planning, not bringing in external management experience where needed)?	Yes/no
9. Have we got weak financial management?	Yes/no
10. Are our turnover and/or profits stagnating/weakening/declining?	Yes/no
11. Have we got all our eggs in one customer or supplier basket, or in a big project?	Yes/no
12. Is cash tight and pressure from the bank and creditors increasing?	Yes/no
13. Are we suffering from some catastrophic event (e.g. a fraud, fire or flood)?	Yes/no

How do you feel about any ‘yes’ answers you gave? Confident? Frustrated? Worried? Do you think you answered any questions dishonestly? Do you think you gave too many ‘yes’ answers? What do you think other people in your business or your banker’s answers would be to these questions about your business?