We keep seeing it: entrepreneurs carefully create their business plans and start implementing them in the marketplace. The entrepreneurs have some success and may even earn a fair amount of revenue. And then, when the entrepreneurs think they have actually established their businesses, they run into issues – issues serious enough to impede further growth or even destroy the company.
Most businesses start with an idea. The entrepreneur carefully builds a business model around that idea, defining what the business is and how the business works. The business plan follows, setting out how the business model will be implemented and managed. Most entrepreneurs seem to think that a well-thought-out business plan will make the business work. In many cases, they’re right – up to a point.
As business plans are executed in the marketplace, they may create initial success. Inevitably, though, the plans run into the real world: they face issues that the entrepreneurs did not expect. At this point, the survival of the business may depend on how well the entrepreneur handles the issues. Even if the entrepreneur gets the business past a crisis, unless the issues are thoroughly addressed and handled, they can continue to plague the business. Established businesses are as vulnerable to such issues as start-ups.
At Vecker, we looked at small-and-mid-sized businesses that failed, to determine whether there are standard causes of business failure. We looked at businesses that failed at each stage of business growth, and across industries, structures, and types of products and services. It quickly became clear that the failures were based in a common set of issues, centering around:
- The validity and sustainability of the business idea
- Decisions made when implementing the business plan
- The trailing consequences of those decisions
- Structure and governance
It interested us that, while businesses fail in the start-up phase because of these issues, established businesses are equally vulnerable. The most vulnerable businesses are those earning $5 million – $10 million, which often run into trouble when trying to implement growth ideas and plans. The business plans that allowed these businesses to achieve good initial success could not keep the businesses growing when they ran into the issues we identified.
For the past 15 years, the Vecker team has worked with businesses on growth. This means that we have had to work with many businesses on identifying the issues that could cause impede or destroy growth, and on addressing and handling these issues as quickly as possible. Some of these businesses faced multiple issues; some faced one almost-overwhelming one. In all cases, when the issues were identified and handled, the businesses could turn back to working on growth and creating marketplace value.