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7/29/2019 Business Crisesdfsdf

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Business Crises

An Overview


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Ladder of Business crisesIt is not one time attack

If overlooked, they almost determinethe coming decline of business.


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What are the seven crisesStarting crisis

Cash crisis (First 3 years)Delegation crisis

Leadership crisis (3 to 7 years)

Prosperity crisis (7 to 10 years)

Finance crisis

Management succession crisis (ten onwards)


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Starting crisisIt is the root cause of failure of a highno. of business ventures.

The reasons are:Lack of thorough knowledge of market potential

Lack of all round managerial ability

Poor book keepingUnderestimation of capital required

Ignorance about tax liability


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Remedies

Choose most familiar project line

Use as much advice and information as possible

Listen to all available adviceOrganise up to date business data

Make realistic plans, not overambitious

Meet your tax consultants/officers often

Realistic estimation of capital requiredCareful selection of machinery

Be conservative about income (low and late)

Liberal about expenses (high and early)

Never start a project without assuring sufficient funds


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Cash crisisExcessive attention to profits & salesgrowth rather than cash-in-hand

Excessive investment in fixed assets

Unplanned expansion


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RemediesTrade off between liquidity and profitability

Constantly watch for ways of economizing on cash

Proper monitoring of current assetsConstantly assess cash position & prepare cash flowstatement every three months in advance.

Consult good accountant

Monitor the stock of raw material,semi finishedgoods, finished goods and outstanding recoveries


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Delegation crisisInability to delegate responsibilities andshare the decision making burden

Psychological problems(lack of faith inothers)

Responsibility grows with business buttime does not


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RemediesSeek out a capable second person to supplement you

Test him/her & start sharing responsibilities

Employees participation in management to boost upthe morale

Identify own weaknesses and select the secondperson who is strong in your weak areas

Be prepared for good salaries, appropriate status,authority and share of profits to retain key person


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Leadership crisisLack of team of managers

Single owner or partner unable to manage

responsibilities of a large firm

Sticking to the old management system/styleof an effective leaders

Tight control


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RemediesDevelop a team of executives and give themsufficient authorities

Concentrate on business strategies, future plans,competition and govt. policies etc.

Act like a leader than a manager/ supervisor

Constantly evaluate how you spend your time

The entrepreneur must train himself in newmanagement skills & styles for achieving & sustaininggrowth


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Financial crisisLack of judicious capital mix

Excessive dependence on borrowed funds

Failure to go publicOver ambitious and unrealistic expansion plan

Psychological problem of loosing control

(100 % ownership of declining unit Vs 80 % of a large

successful firm)


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RemediesGood team work , sufficient delegation and constantmonitoring

Consult experts and bankers for judicious capital mixDont be afraid to go to public

Remember: 80 % ownership of a growing firm isbetter than 100% ownership of stagnant/ declining

one


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Prosperity crisisComplacency

No adaptability and environment awareness

(competition, technological changes, raw material substitute,

new products, consumer tastes)

Loss of market share and declining profits

Overconfidence


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RemediesAlways keep your eyes & ears open

Always remain firmly aggressive andnot passive

Do not be overconfident

Success today is no guarantee ofsuccess tomorrow


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Management Succession crisisLong illness, accident,unexpected deathor incapability of the entrepreneur

No one groomed to takeover

Absence of second key person

Death/ estate duty obligationLack of planning


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RemediesGroom successor

Develop a team of experts A team is better than a

single princePrepare a will

Brief your family about business

Constantly interact with bankers & investors

Have one person with general management skills andfew others for special skills of the entrepreneur

Invite competent persons on the Board of Directors

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