Top 9 reasons small businesses fail
One of the least understood phenomena is why small businesses fail, and there’s a simple reason for the confusion: Most of the evidence comes from the failed business owners themselves—who are often in denial—making it hard to get an unbiased opinion. So, from the New York Times, here are the top 9 reasons small businesses fail, veterinary edition:
1. The math doesn’t work. Simple enough: There’s not enough demand for your veterinary services at a price that will produce a profit for the business.
2. A practice owner who can’t get out of his own way. He may be stubborn, risk adverse, or conflict adverse. Or he may be a perfectionist, greedy, self-righteous, paranoid, indignant, or insecure. Sometimes, you can even tell this type of owner that he is the problem, and he will recognize that you’re right—but not do anything to change.
3. Out-of-control growth. This is a successful business that is ruined by over-expansion. This would include moving into markets that aren’t profitable, experiencing growing pains that damage the business, or borrowing too much money.
4. Bad accounting. You can’t be in control of a business if you don’t know what’s going on. With bad numbers, or no numbers, you’re flying blind. There’s a common misconception that an outside accounting firm hired primarily to do the taxes will keep watch over your business. In reality, that’s the practice owner or manager’s job.
5. Lack of a cash cushion. Business is cyclical and bad things can and will happen over time. This can stress the finances of a veterinary practice. If you’re already out of cash—and borrowing potential—you might not be able to recover.
6. Operational mediocrity. Chances are, you’ll never meet a practice owner who described his business as mediocre. Repeat and referral business is critical for most businesses, as is some degree of marketing.
7. Operational inefficiencies. Paying too much for rent, labor, and materials and your practice will hurt. Now more than ever, the lean companies have an advantage. Not having the stomach to negotiate terms that are reflective of today’s economy may hurt your pracitce.
8. Dysfunctional management. This includes lack of focus, vision, planning, standards of care and anything else that goes into a well-managed practice. Throw fighting partners or unhappy relatives into the mix, and you have a disaster.
9. Lack of a succession plan. Nepotism, power struggles, significant players being replaced by people who are in over their heads—all reasons many family businesses don’t make it to the next generation.
If you feel like your practice is on the verge of failure, it’s time to reflect on where you’ve gone wrong. Chances are, the above factors are at least part of your shortcomings.