How to destroy a small business

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An entrepreneur who combines art with business.
An entrepreneur who combines art with business.

The other day I was reading a story about Mixit. The company became South Africa’s biggest social network reaching something like 10 million monthly active users, who sent 300 million daily messages and it was used in 126 countries. The story said a combination of shareholder disputes, missed opportunities, bad timing and sheer bad luck led to the demise of this once-flourishing network. But worst of all the company was eventually taken over and the new managers including a former banker quickly destroyed any value the business had.

You see, that’s the problem when outsiders get hold of a business. This is not to say that outsiders cannot make a business work. There are plenty of examples of where businesses have been taken over and almost “raised from the dead” after years of mismanagement. For example, a logistics group was on its knees but a sharp CEO has managed to turn it around.

But what I am saying is that you have to be very careful about outside interference in a small business, especially in its nascent, evolutionary first and second stage. The original owner knows the marketplace, is familiar with customer wants, understands the technology, has sussed out the competition so much so that he or she knows their every weakness. The original owner also keeps the ethos of the business. Take Jack Ma, the founder and owner of Alibaba, the online giant. I read somewhere that new employees need to go to the apartment-style environment where the company was founded and learn about its roots. Fortunately in this case the original founder still owns the business.

I’ve got an interesting example of a business that was once thriving but when the original owner died, the son took it over and had grand plans for it. Mind you, the son had never run a business in his life before. He brought in various high-paid consultants with dream schemes to make megabucks from this tiny business that had served the handful of original owners well. The son had ideas to franchise the business and grow it into a national chain. What happened? Well, the son ran the original business into the ground after a short while and all his dream schemes came to naught.

I could go on with examples but I’m sure you get the point. The new occupiers of a small business, existing assets, anything of value don’t have the same motivation to maintain and build what has been given to them. Unless they somehow shared the passion of the previous owners, you will see things go to rack and ruin.

Sometimes the reason is sheer recklessness, other times sheer stupidity, but the main reason is a lack of thorough, deep knowledge of how to run things and how things work. The new owners or occupiers must have a strategy, a clear business plan and a strong commitment to see that the business or existing asset succeeds. But most of all there must be responsibility and accountability but unfortunately these days those qualities are sadly lacking.

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