There is no official consensus on what constitutes Failure To Thrive (FTT) in humans and also in a business. But it usually refers to a business whose growth is below the expected standard of return on investment, profitability, sales and it struggles in its ability to pay its way.
Failure to thrive in early start-up of the business sometimes results in closure, and in older businesses is an important marker of underlying issues. There are many causes of failure to thrive including a lack of a vision leading to drift or directionless actions, system and process deficiencies, and undiagnosed poor trading performance disease.
A specific type of failure to thrive is sometimes seen in abandoned or institutionalised business methodology which seems to cause owners to "give up" and become robotic and unwilling to take action. It is assumed that this phenomenon is emotional in nature, although other factors may also be at work.
Treatment of Failure To Thrive requires discovering and treating its underlying cause(s).
About Failure to Thrive
Although it has been recognised for more than a century, failure to thrive lacks a precise definition, in part because it covers a condition rather than a specific disease. Businesses who fail to thrive don't receive or are unable to take in, retain, or utilise the profits needed to expand and grow as expected or needed.
Most diagnoses of failure to thrive in a business are made well after the first few years of operation — a crucial period of foundational and image development. FTT can often remain unrecognised and undiagnosed until the business owner seeks professional help. They really should have sought this help before starting up.
If the condition progresses, owners of an undernourished business may:
- become disinterested in their business
- avoid creditor contact
- become irritable and stressed
- not reach out to the professionals needed.
Failure to thrive can result from a variety of underlying causes, many are from things not being Actioned, Understood, Managed or Planned;
1. Get Planning
To be successful in business you need to have a plan. I guess we have all heard of “If you fail to plan, you plan to fail!” Planning will help you identify tasks and stay on top of things needing to be done. A good way to do this is to create a to-do list (Action plan) each day - as you complete each item, check it off your list. This will ensure that you're not forgetting anything and you're completing all the tasks that are essential to the survival of your business.
2. Monitor to Manage
All successful businesses keep detailed records. By keeping detailed records, you'll be able to monitor where the business stands financially, how it is trending and what potential challenges you could be facing in the future. Just knowing this gives you the advantage and time to create strategies to overcome the obstacles or risks that can prevent you from being successful and growing your business.
3. Know Your Competition
Competition breeds the best results. To be successful, you can't be afraid to study and learn from your competitors. After all, they will be doing something right that you can implement in your business to make more money. Just look at cricket, every player is now studied so they know their strengths and their weaknesses, you should similarly be aware of your business strengths and weaknesses. This knowledge can also help you to know what your USP (Unique Selling Point) is and why people will buy from or use you.
4. Understand the Risks and Rewards
The key to getting into business is taking calculated risks and mitigating them to allow your business to grow. A good question to ask is "What's the downside?" If you can answer this question, then you know what the worst-case scenario is. This knowledge will allow you to take the kinds of calculated risks that can generate rewards for your business.
5. Be Innovative
Always be looking for ways to improve your business and yourself. You will benefit by adopting a lifelong approach to learning in your professional and personal life. This attitude can help you take steps to make your business stand out from the competition. Recognise that you don't know what you don’t know and be open to new ideas and new approaches to your business.
6. Stay Focused
The old saying that "Rome was not built in a day" is true. Just because you set up a business doesn't mean that you're going to immediately start earning money or making a profit. It takes time to let people know who you are, what you are selling and why they should buy from you, so stay focused on establishing your business and achieving your short-term goals.
7. Prepare to Make Sacrifices
If you think the time and hard work in starting a business is demanding, wait until after you open your doors! Your work has only just begun, once trading commences you will need to juggle staff, suppliers, debtors, creditors, customers and bankers. In many cases, you have to sacrifice time with your family, friends and reprioritise hobbies.
8. Under Promise and Over Deliver i.e. Exceed Their Expectations.
There are many successful businesses that forget that providing great customer service is important. Just look at banks today, they have quite forgotten they are a service organisation first, but their actions and plans are all about making money. Your interaction with your customers gives you a great opportunity to turn them into your advocates and sales force. You don’t then need to spend your precious capital on advertising!
9. Be Reliable & Consistent
Consistency and reliability are key components to surviving and then thriving and making your business a success. You have to consistently keep doing the things necessary to be successful day in and day out.
This will create positive habits that will help you make money over the long term.
There is an old saying “You may be on the right track, but if you don’t keep moving you will get run over!”
10. Know Your Costs and Working Capital Needs
To use an analogy of flying;
A pilot knows what their fuel consumption is and will ensure they have sufficient fuel to make the flight and allow for some margin. The pilot monitors fuel consumption regularly and there are times when consumption is higher than anticipated. In this case they ensure they have alternative places to land to get more fuel. Fuel in a Business Plan is the working capital. Have you done the calculations to ensure you will have enough for your requirements? If a plane runs out of fuel in the air, the plane and the pilot are in trouble, if your business runs out of working capital (cash) you and the business are also in trouble.
It is wise to have a cashflow forecast, factoring in a slow start for start- ups, and maybe a drop off when a business changes hands, this will help the timing of payments to your creditors and collection of your debtors.
Understand or anticipate what percentage of each dollar of sales is cash or payment within 7 days, what percentage is 20th of the month following and what percentage will be slow payers. This will help you anticipate your bank balance on a monthly basis.
11) Goal Setting
Another old saying that I like is “If you don’t know where you are going, how will you know if you get there?”
So goal setting is another critical component to ensure your business thrives.
The goals need to incorporate the (S.M.A.R.T) principle. Being;
Specific, Measurable, Achievable, Relevant, Time bound.
Just like with our health we need to get regular check ups, your business does too and the modern accountant is no longer just a score reporter but can run though ratio trends and industry norms.