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Thread: Business fail rate

  1. #1
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    Business fail rate

    if you google business fail rate in South Africa ...80 % within the first 3 years...it was around 50 % in the first 5 years back when i started my business.

    Why is it so high...something must be wrong with the current advice offered.

    When people talk business stuff ...they talk business plans...cash flow... investment...markets ...etc etc

    If you have been operating a business for longer than 10 years and still going strong...i want to know what it is you are doing that separates you from the 98 percent of failures.

    Was it your business plan...i was told 29 years ago without one of these... i wouldnt last 5 years.

    Is it the manner in which you allocate your turnover...i know this is one of my biggest issue in my business...how i allocate the money which comes into the business...when i get this right i am gona become a very rich man.

    Is it the manner in which you promote your product...services... etc ?

    Nobody ever talks about why there is such a high fail rate.

    Tell us about your experience if you were one of 80 % who closed down with the first 3 years...what did you do wrong?

    The way i see it somebody must be giving the wrong business advice... if you take the fail rate into account.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    I don't know what the statistics are, (does anyone know?) but many folk are practically forced to start some sort of business, because quite simply they cannot find work.

    When businesses are started out of necessity rather than choice, this is often the result. People no longer have an idea or goal, they are desperate and have an immediate need.

    The ease of company registration and negligible cost I believe also contributes to the failure rate. Without a name reservation it is completed within a few hours. Most times a name reservation can hold it up a day or two. Compare this to the "old days" when you were faced with either buying a shelf company or close corporation or registering one, which could take anywhere up to a month and cost a whack.

    Personally I see a massive increase in company registrations; I register so many that I no longer keep record of it. The periodic deregistration list prepared by CIPC is nothing short of breathtaking. Rather than sell a disused company, incorporators simply leave it naturally expire.

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    Diamond Member adrianh's Avatar
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    Quote Originally Posted by Andromeda View Post
    I don't know what the statistics are, (does anyone know?) but many folk are practically forced to start some sort of business, because quite simply they cannot find work.

    When businesses are started out of necessity rather than choice, this is often the result. People no longer have an idea or goal, they are desperate and have an immediate need.

    The ease of company registration and negligible cost I believe also contributes to the failure rate. Without a name reservation it is completed within a few hours. Most times a name reservation can hold it up a day or two. Compare this to the "old days" when you were faced with either buying a shelf company or close corporation or registering one, which could take anywhere up to a month and cost a whack.

    Personally I see a massive increase in company registrations; I register so many that I no longer keep record of it. The periodic deregistration list prepared by CIPC is nothing short of breathtaking. Rather than sell a disused company, incorporators simply leave it naturally expire.
    I agree with you. Another thing is the popular drive towards entrepreneurship (without education). Saying to people who fail at school that they should go out and create their own businesses (without any semblance of business education ) is a recipe for disaster. I also think that education in itself is a disaster - kids are not taught basic social survival skills let alone basic accountancy nor basic math for that matter. I get that the government feels that every subject should be turned into a rewrite of history (my daughters leaned politics in geography in grade 12 - I kid you not) but unless people are taught basic economics nothing will change. We also need to remember that a very very small percentage of kids get to write matic and even a smaller percentage go on to complete tertiary education. Tertiary education also ads to the problem because a BCOM or an MBA does not make one an expert, it only enables one to get a far better start in life.

    I can carry on about this stuff for hours on end, I have 2 daughters at university and I have been self employed for about 15 years. I clearly see the issues that my daughters are facing and I can also clearly see why my business has performed so poorly in the past. I will say this, speaking from experience - technical people who love the technical side of life SUCK at running businesses on the whole - we just want to solve problems, tinker and make stuff....which is no good when we fail to understand nor do the basic business math. Technical people have to have business minded partners otherwise they fail.
    “Why, sometimes I've believed as many as six impossible things before breakfast.”
    ― Lewis Carroll, Alice in Wonderland

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    Diamond Member Justloadit's Avatar
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    From my experience being in business from 1991 in my current one and still going (not sure how long it will continue ), and during the same time having closed down one company and liquidated another, the main factors for a successful business in my mind is as follows :-

    1. Savings in which you can survive with out income for at least one year, preferably 2 years at the current rate that you are living on.
    2. Capital to invest in your business, to be able to purchase at least 3 moths of stock, and be able to maintain business expenses with out income for the first 3 to 4 months
    3. Understand what market you are going into and do some research before starting
    4. Do sales pitches before starting, and have have a line of customers who promise to support you. Now take 10% of these customers who say they will support you and use this as the number that you work all your business decisions into the future. When you are in business, and ready to trade, most will abandon you for evrey reason under the sun, until you are established.
    5. Do your calculations by erring on the higher cost of running your business and lower sales than expected.
    6. Understand what "Mark Up" is, and what "Profit" means. They are not the same!
    7. DO NOT SIGN ANY RENTAL AGREEMENT/LEASE FOR ANY LENGTH OF TIME BEFORE YOU ARE ALREADY TRADING FOR AT LEAST 6 MONTHS. By this time you will know what you need.
    8. DO NOT SIGN ANY SURETY WITH ANY CREDITOR UNLESS YOU CAN AFFORD THE PAYMENT! This does not mean you must not sign a surety. In today's business environment, you will not get credit unless you sign one. What I am saying is ensure that what you sign has a maximum amount and a time limit, and that you understand the implications should you default! This will happen!
    9. Understand the basics of economics, the money in your bank account does not mean you can spend it yet. You first must pay your bills.
    10. REMEMBER you DO NOT SPEND more money than what you make - recipe for failure.
    11. If in doubt ask for help!
    12. If you don't know ask for help!
    13. If you don't understand ask for help!
    14. Always plan for the worst case scenario, and plan accordingly.
    15. Don't take changes and shortcuts, they have a habit of coming back at you at the worst times to be rectified.
    16. Don't get involved in any business unless you personally can do the work. Key employees have a habit of abandoning you in the middle of projests.

    If I think of more I will add.
    Feel free to add your points here as well.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Diamond Member Justloadit's Avatar
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    Some more

    17. Avoid giving credit at all costs!
    18. Get a deposit to cover you material before starting any projects - will save you in the long run plus you have capital to purchase the raw materials. USE THIS MONEY FOR THE INTENDED PURPOSE NOT FOR YOUR FANCY NEW CAR!
    19. Customers who say that cost is no object to the project are the ones who don't pay! Demand 80% up front, if money was no object then they won't complain
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Wrong decision is one of the major causes of business failure!

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    Diamond Member Blurock's Avatar
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    Good advice Justloadit!
    I can also add that when you do your business plan and cash flow projections to determine how much money you require to start your business, multiply that by TEN! The good thing about hard times is that people start thinking for themselves in stead of just waiting for a pay cheque. The bad thing is that we come up with schemes; not well planned business ideas. A scheme is always a $#!t idea and it never works in the long run.
    Excellence is not a skill; its an attitude...

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    For service companies ...dont allow the customer to supply the materials required for the project unless you have adjusted your labour rate accordingly ...especially if you rely on the material markup to cover overheads.

    DONT GET INVOLVED IN BACK HANDS... this will bite you in the long run... by back hands... i dont mean paying cash to a person in a company to get the job... the little things like people asking for a small donation for the kids raffle at school ...even silly thing like a free light on the odd occasion ...it becomes the norma for the that person to expect you to just give.

    NEVER LEND ANYONE YOUR TOOLS... i have trailer loaded with all the tools i require for a project ...if i dont have it i go buy it... what i have noticed in recent years is more and more companies dropping off labour without all the tools... ladders ...scaffolding etc to complete their project ... before you know it you having to ask if you can borrow your own ladder or tape measure etc ...what out for theft ...it has always been a problem ...just got worse in recent years... the answer is simple..."NO" ...it pays to get a cheap R299 wifi camera linked to a 24 hr cloud account to watch your equipment.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    Quote Originally Posted by Blurock View Post
    Good advice Justloadit!
    I can also add that when you do your business plan and cash flow projections to determine how much money you require to start your business, multiply that by TEN! The good thing about hard times is that people start thinking for themselves in stead of just waiting for a pay cheque. The bad thing is that we come up with schemes; not well planned business ideas. A scheme is always a $#!t idea and it never works in the long run.
    If i relied on a business plan and cash projections...i would still be an employee ...29 years later... what would be regarded as the long run? I might try a bussiness plan and cash flow projections once i have hit the my 30 years goal... then i dont really care what happens... the more important thing from then on is going to be isolating all my personal assets from the business... if the folds i can do what everyone else does... close the business offer a 10 cents to the rand and start a new business... when i think back of how many people i have seen screw people like this ...especially the small businesses... power flow exhausts comes to mind... they screwed me for a lot of money when they moved from Umbilo rd to Pinetown... with Michael banks if i recall he worked for Benham and ass. ...man we all got so A$$ f^&*ked... which became primo force exhausts ...where he became a director.
    Comments are based on opinion...not always facts....that's why people use an alias.

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    Diamond Member adrianh's Avatar
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    I'm not particularly interested in console or PC games but I am interested in the development of the electronics industry. I've watched numerous documentaries on the development of the various industries such as consoles and micro computers like Sinclair, Amstrad, Atari etc. The one thing that stands out is that there were dozens of good companies that failed through no fault of their own. It is so easy to "predict" failure in hindsight and then to draw pseudo inferences about what constitutes successful companies and businesses. Of course there are basic business rules that gives one a good basis to work from but those rules are just that - a basis. I am not saying that one should not look to the past and learn from it, I am saying that one needs to be careful to predict the future without hedging your bets. All that it takes to kill a business is one Black Swan event. One needs to position yourself so that such an event doesn't wipe you out completely.

    Organic growth is important - growing fast can kill you if you borrow money to do so - again all it takes is for a small change to occur in the market and not only are you wiped out you are also in debt.
    Too much business can be very detrimental if margin are too low - There is no point in making 1c per item on 1000 widgets if you can make R100 per item on 10 different products.
    Staff are walking overheads - They will eat you alive - Have as few as possible.
    “Why, sometimes I've believed as many as six impossible things before breakfast.”
    ― Lewis Carroll, Alice in Wonderland

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