Wegelin was the Swiss oldest bank of its time. When the news broke that it would close down permanently, some industry watchers were not surprised at all. The bank was accused of helping Americans evade taxes by allowing more than 100 American citizens to hide up to $1.2bn from the country’s IRS for almost 10 years. After pleading guilty, the bank agreed to pay $57.8m as a fine, a fine, when fully paid, will still have the bank badly injured in goodwill and in financial health. Therefore, the bank chooses to close down once the fine is fully paid. What happened to Wegelin Bank of Switzerland is a good example of knowing when to call it a day with a bad business so that something new can be started.
There is a huge difference between an entrepreneur and a business owner. An entrepreneur is an unrepentant business idea producer and an ardent strategist. He is a person built of high-quality, hard-hitting fibre suitable for long distance running in business. If you refer to an entrepreneur as an unceasing business development persona, you may not be far from the truth because he is someone who is forever generating new idea and never stop to come up with more ideas while he is yet pursuing one to a logical conclusion. A business may fail and closed down but an entrepreneur never looks back in thinking what next business line to pursue. It is not an option for him or there is no other economic alternative to pursue other than for him to remain as promoter of businesses. An entrepreneur is a huge, well-calculated risk taker.
However, a business owner may just be a flash in the pan. He is bereft of ideas and his emotions may often run high that he knows he cannot be seen as an innovative thinker. He is sometimes cautious of making a business move. When a business is showing any sign of sickness or it totally unravels, you may hear a business operator saying ‘I am not doing again, I have wasted all my money. I will go and look for another work. May be I am not cut out to run a business of my own’.
A business, whether micro, small or large scale enterprise may show signs of floundering at any time. Some businesses are like bottomless pit: notwithstanding the amount of money injected into them from time to time, they never show sign of becoming thriving businesses. It may become clear that the business may not recover but fail outright. Where this is the case, the business owner ought to be humble enough to press the reset button by winding up the failed business to start something new. Not a few business owners have been condemned to becoming chronic debtors by such businesses. It is only pride that can make someone stay put with such a business (or it is used as a cover up for some diabolical activities).
Be humble to start again – on a different note:
The question is, for how long should a business be watched for signs of recovering from distress before it is closed down if it won’t survive? By nature of businesses, some have very short gestation period while it may take years before some businesses begin to show sign of being alive and healthy. Businesses are like food crops and cash crops. After three months you may harvest your corn but a cocoa plantation will be nurtured for years. For instance, a purchase and supply business may qualify as a short cycle business. But if you have to spend two years looking for your first purchase and supply contract, you need to think seriously whether you have what it takes to run such a business or not. If this is the case, there will be need to press ‘reset’ button and you find some other business which you really have the skills to do.
It will be necessary to conduct proper analysis of the business to know whether you should give it more time or inject more funds for it to perform better; but if it is clear that it is always gasping for breath, please press the ‘reset’ button. Knowing what to do in a business at any point in time is a special skill every business owner needs to possess. This is where my analysis of the difference between an entrepreneur and a business operator above comes to play. In business, you need to strategise and continue to re-strategise to ensure you are getting good reward for your investment and labour. In this regard therefore, if you have not been recording satisfactory performance in your business, you may need to conduct a health check on it to find out the true situation and condition of the business. The health check will help you discover if you should give the business more time, or restructure the operations by reshuffling the management, or allow fresh blood to bring new innovation into the business, or you should be humble and frank enough to terminate the business. Resources are scarce to come by therefore the little at your disposal should not be wasted. Therefore, if it is clear you need to put an end to the business, please don’t hesitate to press the ‘reset’ button.
Ola Emmanuel is a business planning and cooperative consultant