According to CPA Michael Stevenson of Bakersfield, California (opens in new tab), “the risk of failure should always be kept in mind along with a large question mark: What, if anything, could I be doing wrong?'” ‘What have I missed?’ Finding satisfactory solutions to these questions will determine your level of success.
The department chair and associate professor of accounting at California State University, Bakersfield, Dr. Di Wu(opens in new tab), agrees with his colleague, saying, “It is critical to know what takes a fledgling business down the road to failure.”That’s what this article’s about: the ways in which some company leaders bring about their own demise.
All the positive feedback they’ve gotten on their business plan or product from their loved ones has convinced them.
Those closest to you will almost always be the first to tell you that your product or service idea is guaranteed to be successful. The general public’s opinion, however, may offer a very different and useful perspective.
Stevenson: They launch their groundbreaking idea or product into the market before checking to see if it has already been developed or is protected by a patent.
It’s highly unlikely that you’ll find something that nobody else is doing. A customer lost thousands of dollars because they didn’t check Google to see if a product similar to theirs already existed on the market before rushing to market their brilliant software idea, which turned out to be patented by someone else.
Furthermore, having a patent does not give you monopoly production or marketing rights over your product. The value of your patent will diminish if you cannot successfully defend it. Therefore, you cannot defend that patent if you lack the resources necessary to file a lawsuit.
Wu: Business owners need to know their limitations. To paraphrase, “Don’t be a cheapskate!”
If you need help outside of your expertise area, hire a team that can deliver. If you want to bring someone into your business as a partner, for instance, you should have an attorney draw up a partnership agreement specifically for your company rather than using a template you found online or winging it. In the long run, you might have to spend more money on repairs.
The “curse” of success, according to Stevenson, is the insidious “lifestyle creep” that can bring ruin to both one’s business and one’s personal life.
Too often, accountants see what happens when a company or professional (including lawyers, doctors, and CPAs) experiences rapid growth, a surge in revenue, and a corresponding increase in discretionary spending.
They go from eating Top Ramen in a studio apartment to buying a megahome and expensive toys and spending weekends in Las Vegas or similar venues, and they begin to associate with people who are more well off than they are and think, “Well, this guy has a 32-foot fishing boat. I really need a boat! They buy one, and then they feel sick to their stomach because their spending has increased so much that their business can no longer afford their lavish way of life.