How to Fail in Business

      In my book, Business Fits, I have a chapter titled “Why do businesses fail?”   There are a lot of reasons but the number one reason is under capitalization.  Everything takes longer and costs more than you expect. 

        Franchise businesses do better than independent businesses because a good franchisor will not award a franchise to a prospect that is under-capitalized.  In my experience, divorce is a major cause of failure with franchises. Financial success and often long hours are hard on a relationship.  Divorce creates an under-capitalization situation.

        One thing that can guarantee a business will fail is if you run it like the federal government operates: 

·       Spend and borrow money like there is not tomorrow with no plan to pay it back.

·       Hire friends and relatives who are not qualified.

·       Hire more staff than is needed and pay them without regard to performance.

·       Hire people based on race and gender, not qualifications.

·       Spend too much on unnecessary studies. 

·       Spend a great deal of time on things that don’t matter or are out of your control.

·       Make your organization top-end heavy with too much management and not enough production.

 

        Run your business like the federal government, and you will fail.  The federal government is corrupt and incomplete beyond belief.  It is hard to believe the Marxist Left wants big government to control every aspect of our lives.

 

        I don’t know who wrote this, but I find it hilarious. 

 

A toothpaste factory had a problem: they sometimes shipped empty boxes, without the tube inside. This was due to the way the production line was set up, and people with experience in designing production lines will tell you how difficult it is to have everything happen with timings so precise that every single unit coming out of it is perfect 100% of the time. Small variations in the environment (which can’t be controlled in a cost-effective fashion) mean you must have quality assurance checks smartly distributed across the line so that customers all the way down to the supermarket don’t get pissed off and buy another product instead.

 

Understanding how important that was, the CEO of the toothpaste factory got the top people in the company together and they decided to start a new project, in which they would hire an external engineering company to solve their empty boxes problem, as their engineering department was already too stretched to take on any extra effort.

 

The project followed the usual process: budget and project sponsor allocated, RFP, third-parties selected, and six months (and $8 million) later they had a fantastic solution — on time, on budget, high quality and everyone in the project had a great time. They solved the problem by using high-tech precision scales that would sound a bell and flash lights whenever a toothpaste box would weigh less than it should. The line would stop, and someone had to walk over and yank the defective box out of it, pressing another button when done to re-start the line.

 

A while later, the CEO decides to have a look at the ROI of the project: amazing results! No empty boxes ever shipped out of the factory after the scales were put in place. Very few customer complaints, and they were gaining market share. “That’s some money well spent!” – he says, before looking closely at the other statistics in the report.

 

It turns out, the number of defects picked up by the scales was 0 after three weeks of production use. It should’ve been picking up at least a dozen a day, so maybe there was something wrong with the report. He filed a bug against it, and after some investigation, the engineers come back saying the report was actually correct. The scales really weren't picking up any defects, because all boxes that got to that point in the conveyor belt were good.

 

Puzzled, the CEO travels down to the factory, and walks up to the part of the line where the precision scales were installed.

 

A few feet before the scale, there was a $20 desk fan, blowing the empty boxes out of the belt and into a bin.

 

“Oh, that,” says one of the workers — “one of the guys put it there ’cause he was tired of walking over….. “every time the bell rang”.

 

            “The most terrifying words in the English language are: I’m from the government and I’m here to help.” – President Ronald Reagan

 

 

 

 Business Fits by Terry Oliver Lee is available on Amazon as an e-book or a paperback.     http://BusinessFits.com