Newspaper article THE JOURNAL RECORD

The Three M's of Small Business Failure

Newspaper article THE JOURNAL RECORD

The Three M's of Small Business Failure

Article excerpt

The U.S. Small Business Administration has conducted extensive post-mortum research to catalogue the causes of small business failure. At first glance, the resulting list would appear to be quite lengthy; however, the majority of these causes can be condensed into what I call my Three M's of business failure. By giving proper attention to these Three M's and their associated pitfalls, you can improve your own company's odds for success. My Three M's are comprised of Money, Management and Marketing.

Money: It takes a long time for a start-up company to break even because unforeseen contingencies always develop. In the interim, you still need to support your family. Before you launch your business, set aside a nest egg that will allow your family to survive for at least three times longer than the time period you are projecting to achieve break even with the business. Use this same multiplier to project the operating capital your company will need; determine your maximum negative cash flow from your projections and multiply this amount by three to determine the operating capital you should raise. As tough as it is to raise small-business capital, it is always easiest the first time around. If you raise insufficient capital and only achieve small successes by the time your money runs out, investors probably won't be interested in throwing good money after bad.

Management: The vast majority of aspiring entrepreneurs fill their management ranks with friends. This is not only the surest way to break up a friendship, it is also the most predictable way to enhance failure. Never hire acquaintances to join your management team unless (1) they have management experience appropriate to the field of your business, and (2) they are willing to openly disagree with you. Otherwise, you are destined to have mediocre business success at best. …

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