A Cautionary Tale
In 2009 the company I joined was on a meteoric rise. One year later, it had crashed and burned. What went wrong?
In early 2009, after running my own business for 3 years, I made the difficult decision to re-enter the world of the gainfully employed. Lured by the security of a regular paid salary, I forgot the basic notion that employment, essentially, is less secure than running your own business, as in effect you then only have one client – your employer; and if things go wrong, you're stuck. This would prove to be the case when, in January 2010, my employer went into administration.
This article is a brief insight into some of the fundamental mistakes made within this business that ultimately led to its downfall, in the hopes that it will stand as a cautionary tale to others within their own business.
Running before you can walk
Growth within a business is a magnificent thing, and something many strive for – however if managed incorrectly, and if rushed, it can do significant damage. The company I worked for doubled its workforce and trebled its overheads within the space of 4 weeks – this was the beginning of the end.
Believing youe own hype
The business owner, typically, would over-egg the success of the business when speaking to potential clients in order to present the company in a better light. Ultimately, however, she began to believe what she was saying, to the point of delusion about just how stable the company was and how successful it had become.
Ignoring the advice of others
In order to assist with the growth, various outside experts were called in. However from the offset those relationships were doomed because the business owner misrepresented the state of the company when dealing with them – so they were building a house on extremely fine sand. In each instance that outside assistance was sought, after a month or two of dealing with them the business owner decided to forgo their advice and proceed on her own steam. In the end, she was even ignoring calls from the company accountants and instead opting to handle the financials of the company herself.
Rushing the exit strategy
This frantic and furied pursuit of growth within the business was all spurred on shortly after the business owner had fully identified her exit strategy – to sell up once the company reached a certain size. She was, however, so enamoured with this goal that she steam-rolled towards it without any real level of care or a plan of any sort.
Forgetting where you come from
The company had, initially, been built on networking; as as time progressed, this still accounted for a vast majority of the work which it secured. The business owner had previously put a lot of time into getting out to various networking groups, and really securing a high profile for herself – however as soon as the company started doing relatively well, decided that networking with SME's (the companies target market), was somewhat beneath her, and as such pulled out of engaging in any activity of this nature.
Failing to trust those who support you
Initially, the business owner was extremely open with the core members of staff – myself included – and we were heavily involved in driving the company forward. This changed, however, and got to a point where we were no longer involved in any discussions about the company. She kept everything to herself and refused to discuss the direction of the company or the concerns we had with it; instead choosing to bury her head in the sand, and painting a picture of success which simply was not happening.
Losing control of cashflow
In the end, this was the undoing of the company – complete mis-management of finances, and a cashflow that was spiraling more and more into complete chaos resulting from a combination of the above issues. When the declining situation within the company lead to the loss of a key member of revenue-generating staff, this was the final death-knell for the business.
In truth, I could write an entire series of books based solely on my experiences with this company during its highs, lows, and prolonged decline – however hopefully what I've been able to recount in this article will be of some use to you in the future of your business, and highlight just a few of the pitfalls which could contribute to things going wrong.
Ultimately the “message”, if there is one, is to be honest with yourself and others; to always take care of the people around you; to make use of the support available to you; and to always look after the cashflow of your business.