Ten key threats to success - business - includes related articles on other obstacles and reading list - Cover Story

Nation's Business, June, 1992 by Sharon Nelton

Not long after Maryles Casto started Casto Travel, a corporate travel agency, in the mid-1970s in California's Silicon Valley, business was going great. These were the go-go years, and Casto Travel was located in the heart of a burgeoning new industry: high technology. Her customers were fast-growing wonders bearing names such as Intel and Apple.

Then, suddenly, thing want awry at her firm. Too many mistakes were being made. The wrong date on a ticket here. The wrong hotel there. Late deliveries on tickets. Clients were not amused.

Casto found herself up against one of the biggest threats a young business can face: growing too fast.

That sounds like good fortune, not a problem, right? You'd like to be growing fast, too?

Not if it's going to mean the death of your company. "Business was coming in so fast I couldn't handle it," recalls Casto, a former flight attendant and travel agent who comes from the Philippines. She virtually put the company on hold, declining new clients until she could get Casto Travel on track again. It was a move that kept the firm alive. Today, Casto Travel, based in Sunnyvale, Calif., is a $70-million-a-year company with 155 employees. With four offices in Northern California and one newly opened in Washington, D.C., it is still growing, but at a manageable pace.

There are numerous obstacles to business success. And while many of them are external (foreign competition or disasters like the underground flood in Chicago), many others can be laid to the entrepreneurial "personality."

"What entrepreneurs have going for them is chutzpah," says psychologist and business consultant Peter Wylie. "They're willing to take risks where most of us would not. They're willing to lay themselves on the financial line."

But Wylie, in Washington, D.C., and his partner, Mardy Grothe, in Bedford, Mass., who refer to themselves as "business therapists," have been inside hundreds of entrepreneurial companies, and they have seen the negatives. Entreprenuers, they have found, aren't necessarily adept at making a business work or managing people.

For example, says Wylie, many entrepreneurs "don't know about hiring a competent board of outside advisers right from the 'get-go' to give them good, solid, straightforward advice." And often, he says, they don't know how to treat employees or even customers very well.

If you're an entrepreneur and these words make you bristle a little, that's good. "Comfort doesn't provide the answers. I think creative disagreement provides answers," says Richard W. Heath, president and CEO of BeautiControl Cosmetics, Inc., based in Carrollton, Texas.

In fact, Nation's Business is a little uncomfortable itself, because we've listed the 10 biggest threats to the success of a small business and we're suggesting ways you can overcome or avoid them.

Every time anyone has the nerve to name the 10 best or 10 biggest or 10 sexiest anything, it's like trying to catch the next big wave. But that's a requisite to entrepreneurship--the willingness to take a risk. So, we dare to set down what we believe to be the Big 10.

You don't agree with our choices? Other knowledgeable people disagree with us, too. (See the box beginning on Page 20.)

Such lists can very according to the business, the entrepreneur, business conditions, and the weather. The point is, they get us thinking about how we can make our businesses better.

Based on what we've learned from talking with entrepreneurs and experts over the years and in recent interviews, here are our candidates, not necessarily in order of priority:

1 Not knowing how to manage

and operate a business.

You may be extraordinary creative or a high-tech genius, but that's not enough.

"Small-business owners also need to develop managerial competence as well, particularly in cash management," according to researchers Rejeswararao Chaganti, Radha Chaganti, and Stewart Malone in their book High Performance: Management Strategies for Entreprenuerial Companies (Quorum Books). The books is based on their analysis of 500 small entrepreneurial firms to determine the reasons for their successes and failures.

Lack of knowledge can permeate every area of business. You will see signs of such a deficiency in every other item on our Big 10 list.

Businessman Allen E. Fishman of St. Louis, the former owner of Tipton Centers, Inc., a consumer electronics company, recalls what a difference it made when he took that company public and had to bring on a board of directors. "If the board had been in place from the start, there's no telling how many mistakes we would have avoided and how much more profitable Tipton Centers would have been," he says.

He turned that discovery into The Alternative Board (TAB), a company that places owners of small and midsized businesses in small groups so they can meet monthly to share their problems and experiences and give one another guidance. In effect, they serve as board members for one another.

"The objective is to help people who run their businesses do a better job," says Fishman. Members pay $3,000 a year, but that's less costly than paying for a board, he says.