Unexpectedly Intriguing!
September 28, 2005

Not long ago, The Entrepreneurial Mind's Jeff Cornwall posted a list of the top 10 reasons companies find themselves entering bankruptcy. The list carries a great deal of weight since it was provided by an attorney who specializes in bankruptcy law, and as a result, one who is very familiar with how businesses fail.

I thought it might be fun to take the list and apply it to the situation of Air America Radio (AAR) - applying what is publicly known about the troubles of the left-leaning talk radio network. So, without further adieu, here is the Top 10 Reasons that Businesses Fail, adapted for use for AAR and its current parent company, Piquant, LLC:

10. Over-expansion. The need to get there first or to demonstrate revenue growth to anxious investors leads businesses to grow too fast.

9. Poor Capital Structure. Companies take on too much debt....Enough said!

8. Failure to Control the Controllable Costs. Businesses spend down the initial cash before it is flowing in at a positive rate.

7. Failure to Prepare for Volatility of Uncontrollable Costs. For example, energy, materials, labor, or insurance.

6. Add New Products or Divisions that Drag Down the Profitable Ones.

5. Poor Internal Controls and Execution -- customer service, accounting controls, theft, and fraud.

4. Poorly Designed Business Model

3. Reliance on Critical Financing that Dries Up

2. Failure to Adapt to a Changing Market.

AND THE #1 REASON? Management in Complete Denial......

Update 28 September 2005: A better example of the #1 reason is available.

Well, what do you know? Other than inserting the links (and the word "and" for Number 5), I didn't have to modify it at all to apply to Air America Radio's history. Not quite perfect, but awfully close.

One other thought - has anyone opened a prediction market for when AAR will file for bankruptcy?

Previously on Political Calculations

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