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September 13, 2006

Manage Your Small Business Well or The Consequences Could Hit You Where It Hurts

Imagine having the chance to run as state senator but because of bad financial management of your family business, you face the prospect of having to stand down. Well that's exactly what has happened to Joy Padgett, R-Coshocton.

Joy Padgett's aspiration as state senator has been temporarily halted because she has to explain her family’s $1.16 million of personal bankruptcy filing.

I don't want to go into the political aspects of this story, instead you can read it for yourself. There’s a lesson here for you as a small business owners.

If you run a small business it pays you to diversify your income – “don't put all your eggs in one basket.” Try to build more than one business to mitigate or reduce the risk of failure. This is critical if your pension is directly dependent on the success of your business. If one business fails, your pension is still safeguarded because you have other businesses to rely on.

You should also ensure you have good management in place to manage your business. Don't make the mistake in believing you have the all skills to manage a growing business. You must hire good people who have the range of skills to develop / expand your business.

Finally, develop a succession plan. This is vital if you want to manage your exit in an efficient manner that mitigates your tax liability and the handover of the business.

Statistically nearly eighty percent of small businesses fail within three years of starting up. The main reasons for failure are lack of cash and poor management.

Joy Padgett blames her family’s personal bankruptcy on the failure of Main Office Supply Co., the Coshocton-based small business she and her husband owned and operated for 30 years.

She said when every bit of her husband's retirement is built into the company and that is suddenly gone, it is a shock to your system.

Note: It's not enough to want to start a business and make money; you must be savvy enough to make your business a success and to extract the benefits of your hard work. Associate with winners, brainstorm with winners, hire the services of winners, hire good managers, continually tweak you game plan and know when to exit.

David
Small Business Resource

Posted by David at September 13, 2006 1:12 PM

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