It’s eas­ier than you think to destroy a new business

Watch out for these seem­ingly innocu­ous busi­ness deci­sions that can lead to finan­cial ruin:

• Exten­sion Cords. Peo­ple get cold feet and they get a space heater. They plug it into a two-​pronged exten­sion cord and for­get to unplug it when they leave work. That night your entire new busi­ness burns to the ground. Your bril­liant mar­ket­ing plan, your three-​year pro­jec­tions, all of your records, your new prod­uct sam­ples — gone! Ban any exten­sion cords in your busi­ness that are not three-​pronged. Hol­i­days dec­o­ra­tions can turn, “Ho! Ho! Ho!” into, “Oh, No! No!” so take extra caution.

• Bad Receiv­ables. OK, you are using good judg­ment as to which cus­tomers get credit and how much. Even so, it is very easy to get into a business-​life-​threatening sit­u­a­tion because a big cus­tomer goes broke. Bad things hap­pen to good peo­ple. Good and hon­est inten­tions do not always result in get­ting paid. It is very painful and dif­fi­cult to cut off an old cus­tomer, espe­cially when you need the busi­ness. We learned the hard way when a cus­tomer went bank­rupt and left our graphic design com­pany on the hook for his large print­ing bill. Now we require the costs for customer’s print­ing up front.

• Inter­view­ing. It is both art and sci­ence. Like a bad sci­ence exper­i­ment, it can cause explo­sions. Some­one who hasn’t been prop­erly trained to inter­view prospec­tive employ­ees is a recipe for dis­as­ter. There are many ques­tions that you can­not ask with­out risk­ing a nasty law­suit that will cost plenty of time and money. Check out state-​by-​state list­ings to learn more about hir­ing legalities,

• No Back­ground Checks. There are some bad peo­ple out there look­ing for jobs. Even with back­ground checks, there is no guar­an­tee that you won’t have a prob­lem, but it will cer­tainly improve the odds.

• Lack­ing Insur­ance. An insur­ance bro­ker divulged what the three biggest new busi­ness insur­ance fail­ings were: under­stat­ing insur­ance to value; not hav­ing employment-​practices insur­ance; and not hav­ing business-​income replace­ment cov­er­age. Business-​income replace­ment cov­er­age replaces lost rev­enue when dis­as­ter strikes. It is no secret that the insur­ance com­pa­nies are in a big­ger hurry to set­tle a claim when they are pay­ing out money every week to replace that income.

• No Vehi­cle Insur­ance. Legal lia­bil­i­ties aren’t based on your abil­ity to pay, and com­pany vehi­cles are rolling lia­bil­i­ties. Allow­ing some­one who is not prop­erly insured through the com­pany to drive a com­pany vehi­cle can have dis­as­trous results if there is an acci­dent. Com­pa­nies are seen as hav­ing “deep pockets” – even if the pock­ets are empty.

• Ignor­ing Vehi­cle Main­te­nance. With the demise of the full-​service gas sta­tion and longer inter­vals between oil changes, many peo­ple drive on under-​inflated tires. Radial tires makes under-​inflated tires less notice­able. Under-​inflated tires are more likely to cause a blowout, which can result in very bad things. Check all of your vehi­cles at least once a month.

• Tex­ting! Tex­ting while dri­ving is the new drunk dri­ving. Do not do it! Do not allow employ­ees to do it.

• Wrong Accoun­tant. Many accoun­tants just do tax returns and are not qual­i­fied to act as an out­side voice and keep an eye on the finan­cial health of the com­pany. Many com­pa­nies fail because the own­ers didn’t know what they didn’t know. Get a good over­all accoun­tant — not a once-​a-​year tax man.

• Bad Finan­cial Con­trols. Many com­pa­nies have gone broke because of theft or embez­zle­ment. Your accoun­tant must help you set up these sys­tems or get a dif­fer­ent accountant.

An ounce of pre­ven­tion is worth a pound of cure. Ben­jamin Franklin was a good businessman.

Sketch­Pad, our graphic design com­pany, is glad to sup­ply firm esti­mates for your adver­tis­ing, mar­ket­ing or web­site projects.