How to Destroy Your Small Business

I wouldn’t think that anyone in the world would be interested in this topic, but they should be.  Weekly, I have conversations with business owners who find clever and unique ways to destroy the business they are so passionate about.  They get a taste of success and get hungry for more.  So if you’re interested in destroying your business, keep reading.

Destruction comes in many forms, but the basic elements are still the same.  It is the wrong time to take up a new project, is one element.  Another is that the project is outside the core business and requires a different skillset.  Lastly is taking on a project that have a tremendous draw on the company’s resources, both human capital and money.

Timing is everything.  Most people know that they shouldn’t open a swimsuit business in North Dakota in October.  It is the more subtle nuance of timing that is trickier.  For instance opening a craft beer themed restaurant in August of 2007, in a fast growing metropolitan suburb might not have raise any eyebrows.  Even though the timing of that venture proved costly as we missed our first 18 months of projections.  It turned out that a fast growing suburb comes to a screeching halt when the real estate market bottomed out in 2008.  I was fortunate to have enough capital to weather the downturn, but it did cause me to change the business model to more bar than restaurant.  Bars tend to do well during any economic cycle.

The next element involves taking on a business venture that you don’t have the experience to be in.  When things are going your way, money making ideas are passed to you every day.  There are always those people who are close to you who want to go into business with you.  They want to capitalize on your success and help you build an even better company.  The trouble is that the ideas may not be in the line of business that you do well.  In fact, they may be in a line of business that you find interesting or have a passion about.  I have seen many construction businesses fail when the owner decided that it would be fun to own a bed and breakfast, or a winery.  Stick to your core business when taking on additional projects. 

Lastly is money.  Many successful owners may have the belief that their business decisions are sound.  Everything they touch turns to gold.  In some cases, they are just taking a chance on an outside project and invest enough money to get it off the ground.  The problem occurs when the launch takes longer than expected and more money is needed to keep it from failing.  These unplanned expenses start to compile and create an issue in the owner’s main company’s cash flow.  The new project becomes a black hole of money disappearing with no results.  If you find yourself in this position, make the cut early, and save the pain of losing your main source of income.

These insights come from my personal experience.  Within the last 10 years, I had a successful hotel staffing company, three bars/restaurants, and multi-family housing.  One of the restaurants had been challenging to get off the ground, because of my miss on the real estate market timing.  But other than that, it seemed like the perfect time to invest in my long time friend’s herbal supplement business.  No need to hide your surprise, it doesn’t even make sense now when I just typed it.  I had no business getting into the retail health products industry as an operator.  Long story short, my personal wealth paid for it in the form of losses.  By the way, I still own the recipe for the supplement if anyone is interested.

In our seminars, we teach this as part of a company’s lifecycle.  The most common time for an operator to make this type of decision is during the “Blunder” stage.  That is the time when you first start to see success in your new business, but haven’t quite made it to a mature company.  Be mindful of the ideas that cross your desk, and consider how they match your current line of business and resources.