In 20 years as a tax consultant, I’ve seen some excellent businesses. I’ve chosen five from my files (all of whom are still in business many years later), and here’s what they all had in common:
- They looked successful and the top people had a positive outlook.
- They were willing to make an effort for clients.
- They were selective about taking on new clients. A client who won’t pay is a liability.
- They complied with regulations. Having outstanding tax or other regulatory issues saps energy and leads to worry.
- They had good policies and procedures – every employee knew exactly what was expected of them.
- They were careful with money and extremely serious about cash collection.
- The top people were always looking at improvements.
Mistakes
Of the businesses I’ve seen falter, all of the downward spirals were preceded by one or more of the following errors:
- A manufacturer at the peak of his success decided to build a larger facility. The new factory took a few months longer to build than expected. By the time it opened, the market share was gone.
- A purchaser of businesses who didn’t do proper due diligence (investigate and evaluate a business opportunity). One purchaser believed a certain system would produce so many vegetables that he would have been able to supply the market. The system didn’t work despite his best efforts and so he lost his retirement savings. Such tales are common.
- A trader entered into a very expensive lease on the assumption that turnover in the exclusive shopping centre would carry the overheads. The trade turned out to be seasonal and the landlord unsympathetic. Leases and sureties are often the cause of personal insolvency.
- A small businessperson who’s very good at what they do, but has a bad habit. They are so confident in their own ability that they often promise more than they can deliver. This angers clients and the business suffers.
Be honest with your clients, so that they have the correct expectations regarding service delivery. Regular communication is key to customer satisfaction. - In another case, a successful businesswoman traded on her name and reputation, assuming that the government would continue to support her efforts. She ran a company that had every chance of success, but a change in management in the department that had supported her previously left her without her sole client and resulted in the liquidation of her company. She had no ‘Plan B’ in place.
It’s never good practice to rely on one customer or supplier, because the loss of this support can break a business.
Peter O’Halloran is head of tax at BDO, Gaborone. Contact him on 00267 390 2779 or at [email protected]. Please state ‘Tax’ in the subject line of your email.
