Over the last 30 years I have worked with hundreds of businesses that wanted to grow revenue, make more money and have less stress. I find myself always pushing them to try something new for the sake of growth and (sometimes) survival. When you try something new, there are bound to be mistakes; smart companies learn from these mistakes and the mistakes of others; but some don’t pay attention and end up with the making the same mistakes over and over. In the spirit of saving you time, money, energy and stress; here are some common mistakes that seem to happen on a regular basis.
1.) Wait until your company is up and growing before you formalize it. Some business people like to ease into some of the simple decisions; simple in the beginning but more complicated as time goes on. For example, not clearing your businesses name in the beginning and finding out 10 years later someone has the same name and you have 40 trucks driving around town advertising the other company. Another big one, being in business for years and then not defining an exit strategy (85% of business owners don’t have a formal written exit strategy). Yes it is true that Jesus raised Lazarus from the dead, but I don’t think he is coming back to bail out a business person because they didn’t have a plan to exit their business. Prove fact – every business person will exit their business one way or another. You know the saying “death and taxes”. It’s still true.
2.) Rely on informal agreements with partners. Everything is rosy in the beginning but as the business begins to grow and you start to make money, disagreements rise rapidly. If you don’t have defined overall goals (revenue, profit, profit distribution, ownership, leverage or even management roles) defined upfront, it will create problems. I met a guy who spent 15 years growing his business and in a flash of brilliance gave 51% of his company to his wife so they could be seen as a woman owned business. It wasn’t completely documents so it was unclear if she really had it or not; then she decided he was unfaithful and got a restraining order to keep him away from the business.
3.) Quick to hire and slow to fire.If you are growing quickly and desperate for help, you many times skip the time proven principals and hire warm bodies. Hiring after one interview is like hopping a red-eye to Vegas to get married after one date. There are assessment tools out there today and can help the hiring manager evaluate the type of person they are getting, it is easy quick and very inexpensive. Then we fall in love with loyalty; time on the job; and act we are the government where the employee can stay forever just because of seniority (we all know how well that works). But the business has out grown the employee and the employee is actually unhappy in their current job and would rather be someplace else. We just don’t make the decision to upgrade the position because it is easier not to.
4.) Only hire people who are like you. We like people that are like us, that is just a fact of life. We should be happy we actually have dating in this culture because that gives us a little more time to figure things out. Sales people seem to hire sales type people and engineers hire engineering type people, no matter the type of job. We were all created differently and we each have a unique set of gifts which are different than other people. When we hire, we need to take the natural people strengths into consideration. For example, you are most comfortable with sales type people and you need to fill an accounting position. Do you want your sales people doing the accounting? Or you are a engineer and are most comfortable with people that are exact and careful and you need to hire a person to grow revenue. Who are you going to hire, someone like you or not like you?
5.) Too busy to plan the next step. It is a lot easier to get to your vacation destination when you plan the trip and follow the map. Most business owners (under $5 million in revenue) are too busy to plan where they are going; they think that working harder and putting in more hours will get us the results we want. It won’t. They are more comfortable fixing, installing or selling something than defining the goals and objectives for the next 6, 12 or even 36 months. But what is interesting, the business that grows, planning becomes a very important (critical) part of their growth strategy. So if you want to grow, set aside time to plan that growth. Once you start this process, it will become a best friend; because it tells up without much thought what is working and what isn’t. Planning for the future greatly reduces the stress with managing tomorrow because it is clearly defined. Most of my clients within a three-year window will see a 30%-60% improvement in revenue and a 100% to 300% in profit and cash flow by just doing this one simple step. We have developed a unique process to helping business plan for the next 12, 24 and 36 months. If you will invest 2 hours a month in our process, you will see dramatic improvement in top and bottom lines, guaranteed. It has worked for the last 25 years and it will work for the next 25 years.
6.) Let your accountants manage your money. The financial leg of the business has probably the least amount of focus/emphasis put on it than any other functions within the organization. Who wants to deal with the minutia when it is much more rewarding to go after the big deals? No business owner that I know of, so the accounting becomes a necessary evil and is delegated to someone else and not given much more thought. That is until there is a financial crisis. Most surveys and studies I have read reveal that the reason most businesses struggle (or even fail) is heavily weighted toward financial issues. Eight out of ten causes of business problems can be directly traced to financial issues.Your inside accountant and your tax accountant are good sources for telling you what has happened; but financial management is bigger than just looking at what has already happened. Financial management includes: 1) financing, 2) managing bank covenants 3) budgeting – setting standards for your management team to follow 4) evaluating predicted results with actual results and determine problems areas – trouble shooting, 5) cash flow forecasting , 6) tax strategies to insure that debt to worth and working capital is adequate to fund future growth, 7) compensation and bonus program for yourself and key employees, 8) best ways to fund growth, 9) managing daily cash flow and 10) historic financial statement review and analysis.
7.) Make all of the decisions yourself. There are a number of things that work against the CEO that tries to make all the decision themselves: 1) the business will stop growing because all of the decisions flow through one person, 2) the management team won’t grow because they are not allowed to think for themselves and make decisions, 3) the owner, over time will get burned out or his home life will suffer (or worse), 4) quality of the decisions will not be good because the knowledge level is too broad to be moderately knowledgeable in all areas of the business and 5) the owner/CEO won’t grow because there is no one mentoring or challenging the decisions that are being made.
8.) Letting daily activities keep you from the “most important” issues. To grow a business, it takes a lot of practice and effort to focus on the important things first. It means knowing when to delegate, when to rest and when to effectively communicate with your management team. If you allow yourself to be drive by daily activities or solving the latest crisis, you will lose your ability to set priorities and focus on goals. Discipline is the key word here. Most times an accountability partner will enable you to make gigantic steps forward that you could not make yourself. That is why Weight Watchers is so successful.
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor