Small Business Q & A: The Business Autopsy: A Fact Of Life

Written by Tim Knox


Last week we discussedrepparttar importance of performing an autopsy on a dead business. No, I haven't been watching too many of those wonderfully graphic, TV forensic investigation shows. The reason I recommend you do a business autopsy is to uncoverrepparttar 104830 exact reasons whyrepparttar 104831 business died. This is valuable information that can not only heal feelings of personal failure, but also better prepare you forrepparttar 104832 pitfalls of business should you ever takerepparttar 104833 plunge again.

Starting a business is never easy andrepparttar 104834 odds of your success or failure are about even money. The fact is, approximately half of all small businesses fail withinrepparttar 104835 first four years. And a large percentage of those failures occur withinrepparttar 104836 first year. These arerepparttar 104837 statistics that keep many entrepreneurs awake at night. Like Sisyphus, always pushing that boulder to repparttar 104838 top ofrepparttar 104839 hill only to have it tumble back torepparttar 104840 bottom each time, you never know when you're going to lose your grip on your business and have it tumble back over you.

OK, so far in this column I have managed to squeeze in references to modern American television and ancient Greek mythology. Enough highbrow beating aroundrepparttar 104841 bush. Performrepparttar 104842 autopsy and learn from it. Only by knowingrepparttar 104843 real reasons your business died can you identify and hopefully stave off those maladies before they take you down next time, if there is a next time. And if you're a true entrepreneur there will be a next time, trust me on this.

There are many reasons why businesses fail, but according to a recent survey by U.S. Bank,repparttar 104844 majority of business failures can be attributed to three reasons: bad management, bad financial planning, and bad marketing.

Bad management comes in many forms. The survey showed that seventy-eight percent ofrepparttar 104845 business failures examined were due in part torepparttar 104846 lack of a well-developed business plan and a business owner who had no business being inrepparttar 104847 business he was in. In other words,repparttar 104848 business owner did not have an adequate knowledge or a thorough understanding ofrepparttar 104849 business he had chosen to start. This is why software entrepreneurs like me don't start shoe stores. I have feet, I wear shoes. That's not enough to qualify me to go intorepparttar 104850 shoe business.

Next, seventy-three percent ofrepparttar 104851 business failures inrepparttar 104852 survey were also manned by owners with rose colored calculators. These business owners over-estimated revenue projections (the number of expected sales) and under-estimatedrepparttar 104853 burn rate (the amount of money required to sustainrepparttar 104854 business per month).

It gets better. Seventy percent ofrepparttar 104855 failed businesses inrepparttar 104856 study were led by entrepreneurs who were in denial regarding their own competence, or more torepparttar 104857 point, their own incompetence. These business owners either didn't recognize or chose to ignore their own entrepreneurial shortcomings. These entrepreneurs also did not seek assistance from others who might have made up for their inadequacies. It's sometimes hard to ask for help when you are supposed to berepparttar 104858 one with allrepparttar 104859 answers.

Small Business Q & A: Investing In Son's Business Could Cause A Real Family Feud

Written by Tim Knox


Q: My youngest son wants to borrow $5,000 to start his own business. My wife is afraid to tell him no. She thinks we should just give himrepparttar money and not expect anything in return. I disagree. He doesn't have a very good track record with money, so I'm a little worried that my investment will be lost. Should I loan himrepparttar 104829 money and hope forrepparttar 104830 best or just tell him no and hope he doesn't get too upset?

A: The first thing you need to do, Jeff, is determine if this money would be offered to your son inrepparttar 104831 form of a gift, loan or investment. The very wording of your question tells me that you have not yet made that all-important distinction.

It sounds like your wife wants to make a gift ofrepparttar 104832 money, expecting nothing in return butrepparttar 104833 undying love of her last born son.

You, onrepparttar 104834 other hand, don't know if you should offerrepparttar 104835 money as a loan (should I loan himrepparttar 104836 money) or as an investment (worried that my investment will be lost).

Until you can make that distinction, your money should remain in repparttar 104837 bank.

I have a very simple rule when it comes to loaning money to relatives: NEVER, EVER loan money to anyone you might have to sit next to at Thanksgiving dinner.

"Son, pass me that dressing and tell everybodyrepparttar 104838 story of how you blew your old dad's retirement money..."

A loan from a relative is no different than a loan from a bank. You, Mr. Banker, are giving your son, Mr. Borrower,repparttar 104839 use of your money for a specific period of time and you fully expectrepparttar 104840 loan to be paid back under specific terms, even if his business goes south. Sure, you will probably be a little more forgiving than a bank whenrepparttar 104841 loan goes unpaid, butrepparttar 104842 damage to your personal relationship could be extreme and hard to repair.

Inrepparttar 104843 most basic of terms if you loan your sonrepparttar 104844 money you become repparttar 104845 creditor and he becomesrepparttar 104846 debtor. Have you ever heard of a creditor and debtor having a very good relationship? Has Visa ever called you up just to ask how you're doing? Has your mortgage company ever named a kid after you? Probably not.

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