5 near-death experiences in small business
Most small business owners can tell you stories of when a simple mistake almost spelled the end of their business. John O’Brien, franchisor and founder of Poolwerx, shares some of his...
Death by accountant
Like most small business owners I didn’t enjoy doing the book work when the business first started. So, I hired an in-house bookkeeper and left it to him. That was one of my biggest rookie mistakes.
With no checks and balances in place my new bookkeeper found the opportunity to defraud the company too tempting. In fact, he renovated his entire house at my company’s expense.
From then on I ensured systems were in place to flag any financial discrepancies.
The one per cent rule
Business partners are often necessary for seed funding in the early days of a business but always make sure you control 51 per cent of the business. If you don’t you could find yourself unable to make quick decisions, and having to consult and negotiate with partners at every turn.
Partners don’t always view a business the same way you do. Upcoming retirement, young families and other business interests can mean they want different things. Avoid being weighed down by indecision and conflicting interests and make sure you have that extra 1 per cent.
Grow, or watch it die
I once took out 23 credit cards just to pay staff wages after my bank restricted my borrowings. I saw a great opportunity to go national, however my bank didn’t have the same vision so I parted ways and got the money elsewhere. I’m glad I took the risk because that was a turning point in the business and without it, we wouldn’t be where we are today.
Don’t be afraid of borrowing big in the early days of your business – that’s when your business needs it the most. And if one avenue of finance dries up, find another. They’re out there.
Under-insure at your own peril
A few years ago a volcanic eruption prompted the New Zealand aviation authorities to ground all flights. This grounding happened on the same day hundreds of Poolwerx franchise partners were due to fly into the country for our major yearly convention.
This could have cost the company around $250,000 in lost travel and accommodation. However, we were adequately insured. We re-couped the money and re-convened the convention for a later date.
In this scenario it was the convention at risk; under a different scenario it could have been the whole business.
Most business owners view insurance as an expensive nuisance but it should be looked at as risk mitigation.
Where do the shares go?
Some years after we started the business, my brother and business partner died in a car accident. This hard time was made more difficult when we discovered he left no will.
His share in the business went to his ex-wife and things became even more complicated overnight.
Always have a shareholders agreement with all partners, family or not, and be aware of who they’ve left their shares to in their will. It may seem like overkill in the early days, but it could save you headaches down the track.