The Wrong Stuff
This is a break in the steps of starting a business in the 2010s and beyond. Consider this a supplement, something that needs a dishonorable mention.
When setting up a business beware not to fall into the trend of the Fail and Bail business model. Yes I made up that term, but unfortunately it is the business model of many companies. Take the money and Run, Cash and Dash, It is all the act of setting up a company with the expectation to fail. Typically a sub-services, or outsource company; this includes collections, mortgage servicers, telemarketing, and customer service call centers with the intent of doing business until failure then either filing for bankruptcy, getting shut down and dissolved by court action or selling off before implosion. This model is not isolated to these industries, there are many other companies that function with this attitude, but on a divisional or departmental level.
I focus on the above mentioned businesses because these are the biggest offenders.
The major offense is what it does to the many companies who use and trust these service businesses to handle sensitive, crucial and important functions and operations under the false impression that since that is what they solely do as a business that they are the most qualified to handle it, unfortunately most times this is not true.
The last 4 places I have been contracted by to assist in the shutdown have all been largely because of massive vendor failure.
The Business Model
This is a simplified explanation of the basic business model by which many of these companies consciously or inadvertently operate by.
For this example I will use a customer service call center outsourcing company because of a recent discussed with on this exact subject.
A call center specializing in customer service is contacted by a company looking to recover from a business failure of their own call center (which happened to be because of improper management) Unbeknownst to them because the manager they hired was running things according to the fail and bail methodologies.
The potential outsourcer dazzled them with metrics, how many calls they could answer per hour, how much money they could save the company, the resources and talent they had at their disposal. It is hard to resist the metrics, the numbers speak for themselves, right?
Unfortunately not always.
Metrics are a great reference, however many times they are used as a constant and benchmark, without circumstances or the human factor being considered. For an outsourcer with the fail and bail business model they don't care, and here is why.
The business model is similar to a simple interest loan, the money is made up front so that the risk is minimal in the long term. The same idea applies here, the model is to make all the money up front by a standard fee, monthly billing to the client, and showing impressive metrics of "X" number of calls per hour, "X" number of customers serviced, and an achieved call quality benchmark. They ignore compliance, violate regulations, and take advantage of their employees. They do as little as possible to achieve the highest numbers possible without regard to retention, true service, or measurable quality that matters.
This is accomplished with low paid disposable employees, most of which are desperate and performing these duties as a last resort before their unemployment runs out, people who have had issues working other places or holding down a steady job, low educated, minimally experienced and most don't care about much other than collecting their pay at the end of the week so that they can survive. They have little to no respect or loyalty.
The vendor operates as long as it can until the failures finally catch up. The owner(s)/investors make money, the officers make money, and when it's time; they sell, are shut down, or voluntarily dissolve. Leaving their clients worse off, laying off their workforce, and selling off the assets to the next fail and bail, or sucker who will inherit all of there mistakes disguised as tangible assets or collectibles.
Many go off to form another outsourcing company and repeat the process.
There is nothing wrong with establishing a business with the intent to sell, this is done all of the time via private equity and hedge funds. The difference is that a "flipped" company is a quality, functioning, and lucrative business set up for long term success.
Go do the same. Establish a quality business destined for long term success and growth hire and value quality employees, be careful when seeking vendors and outsourcing services and operations. Do your do diligence and carefully determine your ROI, don't let yourself get dazzled, and most importantly, remember your workforce is your greatest asset.
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