Now, having looked at the business skills list, let’s go back to what I call the “technical skill”. Saying small businesses fail because they run out of cash is about as helpful as saying the patient died because he stopped breathing. It’s 100% accurate, but it tells you nothing at all.
There are many different ways that a small business will run out of cash, and I will come back to this later. But before we do that, the biggest reason by far that small businesses or business start ups fail – the banks and insolvency practitioners have all done studies on this – is that the owner or owners who started it did not know what they were getting into.
They did not understand their market; they went into it “eyes wide shut”. You would be amazed how many people do that and just assume that they know better, and quite often they don’t. That is the main reason small businesses fail. Other reasons spin off from this, but the main reason is often that they quite simply did not know what they were getting into.
I want to give you a few case studies of people I have encountered over the years. It might help you to decide where you are on the risk spectrum, and then you can react accordingly. I call this low, medium and high risk.
Today, let us look at a Low Risk Case.
This first one was a sprightly young man of 64 years; he had left school at 16, and had spent his entire life in the shipping industry, becoming a Health and Safety expert. Shipping is quite a small market, and he was well known.
Furthermore, what he did not know about health and safety in shipping was not worth knowing. At 64 he had parted company with his employers, but decided he still had something to give.
He was going to set up his own consultancy, providing health and safety advice in the shipping business. He had 48 years experience, everybody knew him; he knew everyone else; he knew how the market worked, so he could go in “eyes wide open”.
This is a low risk start-up. He was taking all the skills and experience he had accumulated and was applying them in a market he knew and which knew him.
If you need some advice on how to get your business started, please don’t hesitate to contact me or read my book “From Crew to Captain” on how to go from working for an institution to working for yourself.