Seven Business Crisis

What is Business crisis?

•Business crisis means creation of such a circumstances in the business which are not according to pre-determined standards.

•These circumstances may results into the winding up of business, if not removed or solved.

List of Business Crisis

1.Starting Crisis2.Cash Crisis3.Delegation Crisis4.Leadership Crisis5.Finance Crisis6.Prosperity Crisis7.Management Succession

Crisis

Starting Crisis: Causes

•Lack of thorough study of market potential

•Lack of all round managerial ability

• Inadequate arrangements for keeping accounts

•Underestimation of required capital

• Ignorance of tax-liabilities

How to beat Starting Crisis?

• Selection of familiar project• Making realistic, not over-ambitious

plans• Keeping up-to-date business information• Encourage participation of investors• Meeting with tax-consultants• Estimation of realistic capital

investment• Taking care in selecting machinery

Cash Crisis: Causes

•Over investment in Fixed assets

•Excessive attention to growth in sales and Profit

•Unable to get bank finance•Expansion of business without proper planning

How to beat Cash Crisis?

•Preparation of Cash Budget•Understand difference between

cash and profit•Monitoring on inventory and

receivables•Appoint good accountant •Take advice of Banker and

Financial Consultants

Delegation Crisis: Causes

•Inability to delegate responsibility

•Inability to share the decision making

•Negligence to organizational pre-requisites

•Psychological reasons•Lack of time

How to beat Delegation Crisis?

•Appointment of a really capable, competent and effective person in the company

•Effective supervision on new person

•Counseling from expert consultant•Giving high remuneration package•Amalgamation with other company

Leadership Crisis: Causes

• Single owner/partners unable to manage responsibilities of large firm

• Failure to delegate authority and to develop a management team

• Failure to adopt the managing style of an effective leader

How to beat Leadership Crisis?

•Be an effective leader•Build a team of mangers/leaders•Give them sufficient authority•Act like a leader than a

supervisor•Constant evaluation of oneself•Concentrate on business strategy•Be a good and effective

communicator

Financial Crisis: Causes

•Failure in choosing right source and combination of fund

•Failure to go for a public issue•Over ambitious and unrealistic expansion plans using surplus fund

•Psychological problems of loosing control

How to beat Financial Crisis?

• Proper delegation of financial power• Consult experts and bankers• Going for public issue as and when

required• Detail evaluation of each source of

capital• Obtain Govt. Assistance• Leasing option

Prosperity Crisis: Causes

•Satisfaction with current success•Failure in coping up with

environmental changes•Decline of market share and

profit•Over-confidence of an

entrepreneur•Un-expected illness or death of

entrepreneur

How to beat Prosperity Crisis?

•Always keeps your eyes and ears open

•Do not relax even in prosperity• Be aggressive, not passive•Do not be overconfident•Entrepreneur always

remember that“Success today is no guarantee of success tomorrow”

Management Succession crisis

• The crisis arises when founder of business dies, and it leads to following three problems:

1.Who will be the next?2.Split in voting rights3.Wining loyalty and trust

Causes

•Tax and legal Issues•Problems of control•Problem relating to valuation

•Partnership and ownership rights

How to beat it?•Have a clear-cut plan for

succession•Advance action in selecting

management successor•Must have one person with

general management skill and few others with special skills

•As a successor it is better to select “team” rather than a single person

How to beat it?• Always invite competent person in

BoD• Develop club of like minded people• Constant interaction with banker

and investors and lawyer• Plan for preparation of will, and

transfer of shares • Brief family about key elements of

business