10 Small Biz Mistakes that Lead to Failure

When I started to pen this thought piece I did so in considering small business in general. I’m going to keep that theme in part but I am also going to add to each challenge point, 1 through 10, at least a simple reason why franchising can provide some level of solution and security from the aforementioned mistake.

These mistakes are not the top 10, the only 10, the best 10 the researched and validated 10 or anything else of a kind. They represent the ones I have had to deal with most in my life, with my friends whom are mostly small business men and women and my clients who are mostly small business developers called franchisers. They do represent over two thousand business owners and I would guess this is a good top 10 list (I am probably right 7 or 8 out of 10 anyway) but I am not going to “shine you on” by telling you they are the result of my “extensive research.” They do represent what I feel. I’m pretty good at this stuff though but some of you have your favorites. Feel free to add them to the mix.

I hope you find this useful… - John

1. Insufficient Working Capital

The most common reason why new businesses shut down is that the owner get his business up and running but completely misses that he will need some start-up capital (and often this is not a small amount) to fun his business until it becomes self-sufficient and can pay its own way.

Cash flow is critical to a startup business. You could be profitable and still have to close your doors because your customers are taking too long to pay you or, you are generating revenues but your bills are coming in on the front end more quickly than full payment is being generated to you. Liquidity is king in a startup venture. Know what your business needs to survive start-up.


Franchise Solution: Most franchises and certainly the top 500 in the United States, require that you have sufficient start-up capital available when you open your doors for business. You don’t have to wonder. You will have it or you will not be granted a franchise license.

2. Winners Stick-to-it Attitude

Starting a business is all about survival. How do you stay around one more day so that you can learn more about your market and close new customers?

At the beginning stages of a business this may mean doing work that might not be completely what you want to do but it helps pay the bills. You need to do whatever it takes to survive and get through until the business can fully support yourself.

Franchise Solution: A franchise company has gone through these iterations and virtually all of them have operating units that have gone through the myriad of challenges that face a new business. You have both the company and a fraternity of franchisees to rely on to help you stay the course and recognize the next action you need to take to open the door tomorrow.

3. Death of Your Vision

There is a sort of mystic fog that exists to those who make it past the anxiety of changing their work path and become business owners. They make the decision to become entrepreneurs, they start the business, they work and slave and get the permits and licenses and build whatever needs to be built (websites, walls, displays, computer networks, etc.) and even begin to make customer contact. But then something happens. The result is energy level drops, activity levels fall to dangerous levels and if they don’t completely check out they at least do so mentally.

They quit.

Building a business is all about momentum. If you had 24 hours to spend on a business they would be put to far better use by spending one hour a day than for 24 hours straight.

It takes time to develop a new company and for people to react to what you provide. Keep your momentum building. Even if your business is only a part time initiative for you at the moment, make sure that every day you are making progress of some sort to move your company forward.

Franchise Solution: A franchise company helps provide you with a business plan and marketing strategy for your first quarter, 6 months, and year and beyond. You have an activity chart. You can evaluate what you are doing against a very specific set of actions and responses.

Further, operational support is there on a regular basis to ensure you are keeping an eye on key indicators. They let you know what is lacking. Is there an area where additional training or marketing needs to be added? A franchise company has a vested interest in your success and one way they demonstrate this is to let you know you are slipping and need to pick up the pace!

4. I am a Rock – I am an Island

Business ownership is not an exercise in self-sufficiency. It is not you being “bossless” or mentorless. Nobody is perfect or has the skills to do everything themselves. You need to understand what it is that you bring to the table and what you need to surround yourself with. You need to resource against your weaknesses. If, for example, you are very strong at statistical analysis but don’t have strong customer service skills then you need to find a strong frontline employee who enjoys client contact.

I want you to understand you need to learn and be willing to do anything to keep going. However, you won’t create high levels of success by forcing yourself to do things that you don’t enjoy and in which you lack core competencies. Know where you stand and what value you can offer. Take a Meyers-Briggs or DISC evaluation if you never have. When you surround yourself with others that complement your skills, you will have more fun and demonstrate to your stakeholders you recognize what is needed to create a world-class business unit.

Franchise Solution: I won’t draw this one out because if you have studied franchising you’ve seen this in type before: Franchising is about being in business for yourself but not by yourself. People, in part typically become franchisees because they realize their inadequacies (and they want to blame someone else when they fail! – No, just kidding). You get into a franchise system to take advantage of the collective

5. Are You Sure You Want to Hire Uncle Rupert?

Never hire from convenience or nepotism. Focus on tasks the CEO should accomplish. Think of yourself that way. Think what will best serve your customer in the long run. Why are you doing work huddled in the back office when you should be out meeting clients, generating PR buzz, and increasing the reach of your networking efforts?

Franchise Solution: A franchise plan will focus on the varying skill set iterations of their successful franchisees and how they interact with the business in advance of your engaging in the business to determine if you fit that model. This may affect working capital needs as well but they will be able to provide you a more precise human resource needs assessment than you might generate as a lone entrepreneur.

6. It’s About the Big Bucks

There are many who tell you to follow a passion. Many of us to be fair do not have passions affiliated with work. You need to enjoy the work. You need to gain great satisfaction from a job well done. But creating money as a goal or as your driving force is like the tender of an apple orchard who constantly picks apples because they are what he sells in order to create a living but who never tends to the soil or the trees themselves.

Ensure you select a business where you gain personal satisfaction by the process; by servicing the client and their needs and by your ability as “CEO” in developing your people, your team.

Franchise Solution: The great franchises have a process to determine if what they do as a business matches your expectations, personal drivers, abilities and investment capabilities. Your honesty in divulging what it is you hope to accomplish and their honesty in presenting their business case ensures to a very high level, that you get into the business that meets both the companies and your criteria.

7. I think I can…er, maybe not

Goal one, yes job one is for the entrepreneur to make it to the end of their first year. Many of them do not. And, we’ve covered some of this already. Many start a business on an impulse and got excited about a perceived opportunity but didn’t do the proper research. These entrepreneurs become disillusioned. Without a backup strategy or the ability to change course or raise additional capital they fold in a matter of months.

The second year can be just as challenging and the goal is that a business really begins to come into its own and hit the stride through 36 months of continual operations. Think of year one as your freshman year in high school; it was exciting and frightening You’re high on energy and ready to take on the world. In year two, your sophomore season, you have learned the lay of the land but may or may not have had the kind of impact (especially financially) you desire. The startup excitement has faded but you are move even. If not, you are part of the second wave of failures. You’ll need to work your way through the downturn and know that the money is coming if you keep at it.

Franchise Solution: A franchise company will have continued to press you right through years one and two in areas of improvement. You will have gained mentors within the family of franchisees. In many cases you will find a colleague in another unit and you will challenge one another. In addition, ongoing or advanced training, webinar events and perhaps a national convention will be in the cards; all of which will provide you with the momentum to carry forward.

8. And Great Was The Fall…

The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it - and then you go out and build the solution. Entrepreneurs who build a business on a customer or on a sliver market component (i.e. the lunch crowd in an industrial park that is controlled by just one company…oh, say, Motorola!) often find themselves calling the printer and instructing him what to put on the “Business Closing for Good!” signs.

Make sure you have a plan if you plan on being a niche business. But this isn’t the only challenge that fits into this category.

The companies with the highest failure rates are restaurants because they are usually built around an owner’s personal tastes. Meanwhile, the entrepreneurs with the lowest failure rates are medical professionals, lawyers and accountants because they are based around a service that we all need (whether we like it or not!) Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product/service.

Franchise Solution: A franchise business model, virtually by definition is replicable in significant marketplaces. They focus on a series of capabilities that fit into a general category that the general populous or the whole of a niche has need of what they provide. It’s simple enough to investigate to determine the components that lead to their success and what it is you would want to avoid. As a matter of course the franchise company will understand the pitfalls and provide navigation around the slippery slopes. That is, provided you are teachable. The key to disaster avoidance is sensitivity to those who’ve traveled the path previously.
Franchising is nothing if it does not help you pilot past the shoals and the reefs of disaster.

9. I’ll Just Read About it…

The Internet has created a generation of nimrods. Pseudo-geeks who believe that if they can just Google it they can learn the entire story; the ins and the outs, the ups and downs and all the juicy insider tidbits.

A great way to get a business going is to find out what other people have done to achieve success and implement those strategies into your own company. This has to be more than just reading about it. We all need to find mentors who have knowledge of our industry and who will give you time out of their day to provide instruction and guidance.

You could set up a formal board of advisers and compensate people for their time but if you’re a startup you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.

Franchise Solution: Uh…this is self-evident. However, let me just say it. A franchise company IS a mentor. They provide the organized development of your business. They start at what you need to do on day one and take you through what you will do when you elect to exit the business. You will receive training, a business system, a marketing strategy, a back end or back office administrative system to analyze data, create reports and evaluate progress and in all sincerity that is usually just the beginning.

10. What the World Needs Now…(er…Come Together…Um, I am NOT a Rock nor an Island?)

My experience is that the person who will not seek out help will also not seek out how to create other important relationships. As it relates to your stakeholders this would mean your involvement in the community that embraces your customers and potential customers.

Connecting with other young entrepreneurs and finding out what they are up to (and how you can help generate countless opportunities) is a great tie-in to your community. Discovering and involving yourself in the areas of service that your clients have interest and passion should truly be a no-brainer. You will get new business opportunities, partners, investment, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).

Franchise Solution: Most every significant franchise I have ever had the pleasure of serving (roughly most the top 200 and another 100 or so in the top 1000) has a strategy these days that recognizes the value of the community the franchisee serves as an integral part of their marketing. Even in franchises where the franchisee works on the business and not in it or is involved part-time, they are taught to focus their efforts on visibility within their service market.