(Article for the Jakarta Globe – issue date 17 December 2012)
MONEY WISEHOW TO STAY IN BUSINESSThe average person will learn by his or her mistakes. A clever person will also
learn from the mistakes of others. So whether you are running a multi-million
dollar conglomerate, a small business or simply managing your own personal
finances it is worth taking the time to study why others have failed and what
lessons can be learned from their mistakes.
Big Corporate failures
The past few years have witnessed an unprecedented string of failures amongsome of the longest established brand names in the world.
The collapse of Lehman Brothers in September 2008 was the greatest failure incorporate history. Other great American institutions such as Bear Stearns,
Merrill Lynch and AIG also failed or needed life support. Across the Atlantic,
high street banks such as Halifax and Bank of Scotland, Northern Rock and theRoyal Bank of Scotland all failed and have survived to this day thanks only togovernment intervention. Indonesia also saw a string of bank failures during
the Asian financial crisis of 1997 / 8.
Why did they fail?
Basically they lost touch with reality and got carried away without taking
account of the consequences of irrational lending or in the case of AIG taking
on risk that they did not fully understand and could not cover when the crunch
came. In most cases those at the helm had little idea of what was happening in
the engine room. Or, as in the case of the Titanic, what dangers were in theirpath!
If you own a restaurant but you don’t know what is going on in the kitchen
don’t be surprised when you lose your customers.
Fraud
Since time immemorial people have cheated and defrauded customers and thecompanies they work for. In 1995 one loan rogue trader, Nick Leeson, was ableto bring down the century-old Barings Bank by his unauthorised andunsupervised trading. Incredibly, several other banks, including Société
Générale and UBS have since fallen victim to similar actions. Nick Leeson by
the way is now in demand for conferences and as an after dinner speaker.
Lessons for small businesses and individuals? Keep tight controls and look outfor anything that appears out of the ordinary.
Keep pace with the times
To survive in business you must be ready to adapt quickly to changing
conditions and markets. It is not the biggest who survive; it’s those who canadapt. The dinosaurs once ruled the world, but when a catastrophe hit theplanet 65 million years ago the big beasts could not adapt to the changed
environment and perished as a result.
In the field of telecommunications, keeping pace with technology andconsumer demands can mean a short life for those at the top. Barely five years
ago BlackBerry and Nokia were at the top of the tree. Now they are falling stars
and unless they can quickly come up with innovative products to revive theirfortunes could soon disappear into oblivion.
If you are in business, do your research; find out the latest trends. Don’t
assume what you can sell today will sell tomorrow.
On an individual basis, the same applies. We need to constantly update ourskills and be prepared if necessary to retrain and change career several times.
Always maintain liquidity
A business may be very successful but if it does not watch its cash position it
may not survive. The financial meltdown of 2008 was basically due to a drying
up of liquidity which caused asset values to fall as institutions sold everythingin panic to raise cash. An airline may own a fleet of sparkling new jets but if it
has no cash to pay its flight crew or pay for fuel it is out of business.

On the individual level, thousands of homeowners in the US and elsewhere
have been forced to abandon their homes because they fell behind on theirmortgage payments. If they had kept adequate cash reserves they might have
weathered the storm.
So how do we stay in business?
It is always a challenge and failure rates are high. But success can bring bigrewards. Here are a few basic principles:
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Maintain healthy cash reserves at all times
Don’t over-extend any borrowing
Don’t lose sight of what is going on in the ‘engine room’
Monitor changes in consumer behaviour
Be ready to adapt quickly to changing circumstances
Make sure you have adequate insurance against all possible calamities
Don’t venture into fields you don’t fully understandDon’t put everything into the business; have a good exit strategy

Even if you do everything right you are still going to need some luck on yourside. What if you still fail? Don’t mull over it; learn from the experience andtry again or try something different. Sometimes you need to fail first inorder to succeed!
Colin Bloodworth, director of PPI Indonesia, has spent over 20 years inIndonesia. If you have any questions on this or a related subject you cancontact the writer at indonesia@ppi-advisory.com