I invited Bobby Guy, a local attorney with Waller/Lansden here in Nashville, to speak in my MBA class last week. While it may not seem that unusual or blog-worthy to mention that I had a lawyer in my class, it is his area of law that makes his visit unusual. For you see, Mr. Guy practices bankruptcy law. How often do entrepreneurs get to hear from a person who understands business failure from the inside before they start their ventures?
From this perspective, Mr. Guy clearly has a very instructive message for entrepreneurs. He likes to give a talk called "A View From Down-Under: The Top Ten Reasons Companies That Should Make It ... Don't."
And here are his Top 10:
10. Over-expansion. The need to get there first or to demonstrate revenue growth to anxious investors leads businesses to grow too fast.
9. Poor Capital Structure. Companies take on too much debt....Enough said!
8. Failure to Control the Controllable Costs. Businesses spend down the initial cash before it is flowing in at a positive rate.
7. Failure to Prepare for Volatility of Uncontrollable Costs. For example, energy, materials, labor, or insurance.
6. Add New Products or Divisions that Drag Down the Profitable Ones
5. Poor Internal Controls and Execution -- customer service, accounting controls, theft, fraud
4. Poorly Designed Business Model
3. Reliance on Critical Financing that Dries Up
2. Failure to Adapt to a Changing Market
AND THE #1 REASON? Management in Complete Denial......
I think businesse' fails simply because of the fact that they don't take in cognisance the simplest factors like consultations with the professionals and to also attend workshops.