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Business Crises: An Overview

There are seven main business crises that can threaten the success of a company over time: (1) Starting crisis, (2) Cash crisis in the first 3 years, (3) Delegation crisis, (4) Leadership crisis between 3-7 years, (5) Prosperity crisis between 7-10 years, (6) Financial crisis, and (7) Management succession crisis after 10 years. Remedies include choosing a familiar business line, seeking advice, monitoring finances closely, developing a team of managers, planning for succession, and avoiding complacency during periods of prosperity. Proper preparation and ongoing evaluation can help businesses navigate these crises.

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24 views

Business Crises: An Overview

There are seven main business crises that can threaten the success of a company over time: (1) Starting crisis, (2) Cash crisis in the first 3 years, (3) Delegation crisis, (4) Leadership crisis between 3-7 years, (5) Prosperity crisis between 7-10 years, (6) Financial crisis, and (7) Management succession crisis after 10 years. Remedies include choosing a familiar business line, seeking advice, monitoring finances closely, developing a team of managers, planning for succession, and avoiding complacency during periods of prosperity. Proper preparation and ongoing evaluation can help businesses navigate these crises.

Uploaded by

bagrivinay
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Business Crises

An Overview
Ladder of Business crises
It is not one time attack
If overlooked, they almost determine
the coming decline of business.
What are the seven crises
Starting 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)
Starting crisis
It is the root cause of failure of a high
no. of business ventures.
The reasons are:
Lack of thorough knowledge of market potential
Lack of all round managerial ability
Poor book keeping
Underestimation of capital required
Ignorance about tax liability
Remedies
Choose most familiar project line
Use as much advice and information as possible
Listen to all available advice
Organise up to date business data
Make realistic plans, not overambitious
Meet your tax consultants/officers often
Realistic estimation of capital required
Careful selection of machinery
Be conservative about income (low and late)
Liberal about expenses (high and early)
Never start a project without assuring sufficient funds
Cash crisis
Excessive attention to profits & sales
growth rather than cash-in-hand
Excessive investment in fixed assets
Unplanned expansion
Remedies
Trade off between liquidity and profitability
Constantly watch for ways of economizing on cash
Proper monitoring of current assets
Constantly assess cash position & prepare cash flow
statement every three months in advance.
Consult good accountant
Monitor the stock of raw material,semi finished
goods, finished goods and outstanding recoveries
Delegation crisis
Inability to delegate responsibilities and
share the decision making burden
Psychological problems(lack of faith in
others)
Responsibility grows with business but
time does not
Remedies
Seek out a capable second person to supplement you
Test him/her & start sharing responsibilities
Employees participation in management to boost up
the morale
Identify own weaknesses and select the second
person who is strong in your weak areas
Be prepared for good salaries, appropriate status,
authority and share of profits to retain key person
Leadership crisis
Lack of team of managers
Single owner or partner unable to manage
responsibilities of a large firm
Sticking to the old management system/style
of an effective leaders
Tight control
Remedies
Develop a team of executives and give them
sufficient 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 new
management skills & styles for achieving & sustaining
growth
Financial crisis
Lack of judicious capital mix
Excessive dependence on borrowed funds
Failure to go public
Over ambitious and unrealistic expansion plan
Psychological problem of loosing control
(100 % ownership of declining unit Vs 80 % of a large
successful firm)
Remedies
Good team work , sufficient delegation and constant
monitoring
Consult experts and bankers for judicious capital mix
Don’t be afraid to go to public
Remember: 80 % ownership of a growing firm is
better than 100% ownership of stagnant/ declining
one
Prosperity crisis
Complacency
No adaptability and environment awareness
(competition, technological changes, raw material substitute,
new products, consumer tastes)
Loss of market share and declining profits
Overconfidence
Remedies
Always keep your eyes & ears open
Always remain firmly aggressive and
not passive
Do not be overconfident
Success today is no guarantee of
success tomorrow
Management Succession crisis
Long illness, accident,unexpected death
or incapability of the entrepreneur
No one groomed to takeover
Absence of second key person
Death/ estate duty obligation
Lack of planning
Remedies
Groom successor
Develop a team of experts “ A team is better than a
single prince”
Prepare a will
Brief your family about business
Constantly interact with bankers & investors
Have one person with general management skills and
few others for special skills of the entrepreneur
Invite competent persons on the Board of Directors

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