Literature Review 2

Literature Review: ‘The Seven Pitfalls of Business Failure And How to Avoid Them’

by Patricia Schaefer (2011, Attard Communications, businessknowhow.com)

 http://www.businessknowhow.com/StartUp/business-failure.htm

I found this article on businessknowhow.com. Owned by Attard Communications the site is aimed for starting, small and growing home-based businesses. You can find many free articles on here about sales, marketing, finance and starting up a small home business. It sets out to offer practical advice, tools and information reaching about 4 million people a year.

Patricia Schaefer is one of six writers for the company who has worked previously as a news reporter writing news, profiles and celebrity features. She has written articles such as ‘Stamp out the 10 Most Common Postcard Marketing Mistakes’ and ‘Get the best price for Heating Oil this Winter’. This article is dated 2011 so is still very much relevant.

Although it is not aimed for the Arts or Entertainment venues, the article sets out to offer tips on how to avoid some of the major mistakes start-up companies often make.  Unlike the last article I reviewed ‘How Six Companies Failed to Survive 2010’ that contained actual case studies and example of businesses that failed, this article is giving key factors to avoid in setting up a new business.

Points that relate to my professional inquiry:

-          “business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling , production, and hiring managing employees.”

I feel this is especially true of the arts. Arts Managers are unique in the way that they must have a broad spectrum of knowledge- business and the art.  Our Managing Artistic Director’s background was performing in Broadway shows and teaching theatre studies at a University. He lacked the business knowledge and had no experience in the running of a theatre. His passion was producing Broadway shows and produced one , which cost the theatre money they didn’t have.

-          “he or she has a skill at hiring competent people, training them and is able to delegate”

One of the biggest mistakes that the Managing Artistic Director made very early on was hiring an incompetent accountant.  She was unable to keep track on the finances in an organized and structured way, which eventually led to her being fired. For a short time after the Managing Artistic Director managed the books trying to fix them, this took him away from delegating tasks to the other employees. When a new accountant was finally hired, he said he had never seen books like it. They were a mess. Plus, delegating roles led to a lot of confusion. Many managers started with one job title but ended up becoming something else.  There was no training given in the company to employees either.

-          “…insufficient operating funds. Business owners underestimate how much money is needed...”  “many businesses take a year or two to get going. This means you will need enough funds to cover all costs until sales can eventually pay for these costs”

This is all too true in our theatres case.  Not only was there little start-up capital but managers were told large figures that were never there. When things were bad and we were not getting pay cheques, one of the top investors/managers told the company he believed we should be able to break even in 6-8 weeks of opening in his experience. He had a very unrealistic idea of how sales would go.

-           “ A focus on slow and steady growth is optimum”

One major issue our company ran into was trying to expand too soon. We launched the new theatre with the in-house show ‘Superstarz! Live’. Rather than focus on this show , improving it each day, promoting it to the community we also had a Broadway Series introduced.  About a month after opening ‘Greater Tuna’ a comedy play with two actors playing several characters was performed over a couple of weekends. The problem here was the actors were the Managing Artistic Director and the PR lady in the office. Juggling the running of the theatre with performing did little to help the theatre run smoothly and stress levels were high. As if that was not enough just 2 months after opening and with little planning ‘A Broadway Celebration’ swung into production in just over 2 weeks. The show ran for 2 weeks but with little promoting was not much of a success. During this time employees were overworked and struggled to keep up with the demand of running one show whilst trying to produce another. It was a stressful time and resulted in a loss of money rather than gain.  But that did not stop them and so casting followed by rehearsals began for ‘Hairspray’, ‘All Shook Up’ and ‘Rocktastics’. Some performers were being cast in all three doing 12 hr days rehearsing whilst still performing in ‘Superstarz Live’. Halfway though these rehearsals and with stress levels though the roof and people being overworked these shows were cancelled and the Managing Artistic Director was fired.

Establishing your company for a year or so first is key. We were trying to expand when we had not yet gained a solid audience base or even had the finances to back these shows.


To conclude, this article highlights many problems new businesses face, which has helped me to think of the issues our theatre had and how decisions that were being made put us on a slippery slope down. Although aimed at small home businesses many of the issues raised can be used in any business including arts venues.