137. Bankrupt!

Dear Erik,

Someone I know went bankrupt. And that’s a shame, because I think it could have been avoided. I nearly went bankrupt five times myself and each time I could only blame myself for ending up in those situations. After the last time (the 2009 crisis), I firmly resolved that this will never happen to me again. Fortunately, we were able to turn it around each time together with all the partners and colleagues. But this person wasn’t able to.What went wrong? We often write about what you need to do to ensure success. It is also interesting to see where it can go wrong. Knowing what you should not do is, perhaps, just as important as knowing what you should do.

This person wanted to start a business after a successful career of 35 years in large enterprises. Initially, he tried to start a business from scratch, but it did not suit him and so he decided to buy a going business and after some research he found a company and purchased it. And from that moment on, everything went wrong.

Passion. The activity of the company which he bought was not his passion. It was not a long cherished dream coming true. To run a successful business, it is imperative to have that extra belief and commitment.
Choice of sector. The company was highly dependent on the government, which meant profitability was determined by an unpredictable party. Further, the government had no interest in his business model, so there was no common interest. The choice of activity was therefore not optimum. Especially when you see so many sectors with great potential.
Hard work. He decided from day one to work a maximum of three days and spend the rest of the week on other things that were more important to him. I do not know any successful entrepreneur who can manage his business on only three days a week.
Knowing better. He thought it would be possible to lead his company by managing his managers on KPI’s (Key Performance Indicators) and budgets just three days a week. The important thing is to set goals together and, if the goals are not met, to tell your managers things should be better. And here the successful entrepreneur makes the difference. To do this properly, you must know your business, your staff, your customers, your services, and the business processes so well that you can support your managers by giving them advice, and giving them the tools to achieve their targets. Just saying things should be better is not enough. You should also be able to show the way. And this is only possible if you master the subject better than anyone else. If you do not deliver in this respect, your business will not succeed.
Sales. In business, nothing happens if nothing is sold. Everything hinges on sufficient sales. Every successful entrepreneur knows (or should know) how his services and products must be sold and he must be constantly busy with customers, the product and the sales team to improve sales. If you’re not doing this as an entrepreneur, you will miss opportunities and sales will deteriorate. And this is what happened.

In short, as an entrepreneur, you are doomed to failure if you have a company that is not your passion, operating in a sector where you are dependent on others you cannot influence, if you are not willing to work hard, if you are not putting in the effort to know your business inside out and do not take the lead in increasing sales.

Sincerely,

Gerard