How to keep your business alive during economic recessions, avoid common pitfalls, and steer clear of corporate credit scams.
Top 10 Reasons Businesses Fail
Survival Essentials
Protect Against Impulse Purchases
Include a bylaws clause: "All purchasing decisions over [a certain amount] are contingent upon approval by the board of directors." This forces consideration of large purchases.
Don't Short-Change Professional Services
Seek experienced professionals before embarking on plans that could ruin you. The 1244 stock status encourages investors to put equity capital into your business — amounts up to the entire investment can be written off in the current year if there's a loss.
Be Hard-Nosed When Sales Are Down
Skip the frills and concentrate on basics. Maintain courtesy with salespeople — keep them as friends for when business picks up.
Hire Outside Accountants
Have them figure your return on investment, turnover on accounts receivable and inventory. Uncover potential problems before they become apparent.
Set Up an Advisory Board (Power Circle)
Include an attorney, CPA, civic leaders, owners of similar businesses, and retired executives. Meet monthly. Most people you ask will be honored to serve.
Collect Aggressively
Call customers who are falling behind. Don't be too much of a "nice guy" when collecting money. Your invoices will magically move to the front of their payment piles.
Join Trade Associations
Wealth of information on competitors, industry sales figures, new products and trends. Display membership certificates conspicuously — customers like "seals of approval."
Have Your Spouse Work 3-4 Weeks/Year
If you're unavailable, your spouse will be familiar with key people and situations — attorney, accountant, creditors, major suppliers.
Use Free Business Counseling
SBA publications, university seminars, bank and library services.
High-Risk Industries
These industries are considered higher risk by lenders:
Restricted Industries
These industries face lending restrictions:
Corporate Credit Scams & Myths
Myth: "Use business credit instead of personal credit if your credit is ruined"
Scammers tell you to get an EIN to replace your SSN. The FTC warns against this on their website. An EIN does NOT replace an SSN — the goal is to separate you from your business, not hide your identity.
Myth: "Build business credit overnight"
Building a business credit profile is like building a personal one — it takes time. There are strategies to shorten the process, but nothing happens overnight from scratch.
Myth: "Buy a good business credit rating"
Don't buy an unknown aged corporation unless it has ALL items from the 7 steps in place. Some sellers charge $25,000 for an "aged corporation" that's worthless. Always ask for the company name and DUNS number to verify on D&B's website. If they won't provide it — walk away.
Myth: "Aged EIN indicates an aged corporation"
EINs are random numbers — you cannot tell the age by the number. Don't overpay because a promoter claims the EIN is "aged." The IRS confirmed that EINs are not serial numbers.
Red Flags — Beware These Promises
Food for Thought
Your business credit profile must change with your business. Credibility is enhanced when information is correct and up-to-date. Incomplete information can be as harmful as poor credit activity — unknown quantities are considered risky.
Unlike personal credit, there are NO laws protecting business owners against errors in business credit reports. Review your D&B and Experian reports every 60 days for discrepancies.
Never give up. If you never give up, you cannot fail. What's the worst that can happen? You're told no?
Which survival essential is your business weakest in? What will you do this month to strengthen it?