Greenville Business Magazine 2010 May issue : Page 10
››columns Why Some Businesses Don’t Do Well BY BILL LEE “ D oing what I do for a living — business consultant and seminar leader — invites some very interesting ques- tions from clients. One of the most frequently asked questions I hear is: “What are the ingredients that poorly run, barely profitable businesses have most in common?” Each time I hear this question, it reminds me of a profound statement I once heard made by the late Jim Rohn, a Southern California businessman, speaker and lecturer: “Find out what unsuccessful people read and don’t read it. Find out what unsuccessful people do and don’t do it.” Managers who ask me this question are looking for the kinds of behaviors to avoid. In other words, find out what the unprofitable businesses in your industry are doing and avoid doing it at all costs. You’ll have to agree that this approach makes a lot of sense. Owner or manager indifference is the single most common factor I find among businesses that aren’t doing well. Businesses don’t run themselves. And the moment the individual account- able for managing the business makes the mistake of believing 10 GREENVILLEBUSINESSMAG.COM | MAY 2010 Find out what unsuccessful people read and don’t read it. Find out what unsuccessful people do and don’t do it. ” that the business can run itself — that he or she can sit back and relax — is many times the beginning of the end. At that point, profitability almost always begins to deteriorate. Second generation-owners — and beyond — don’t always understand just how much effort their predecessors put into the business to make it as successful as it was when they turned over the reins to their successors. Successive generations often make the mistake of believing that all they have to do is open the doors each morning and the phones will start ringing. Customers will be on the other end of the line placing orders for a profitable mix of business and pay for their purchases by the due date. Nothing could be further from the truth. In today’s competitive environment, all owners have to do is show a few signs of indifference and before they know it, several of their best customers — and perhaps even a few key employees — will have defected. And all they have left are a few journeyman employees and the slow-pay customers that none of their competitors want. The following are other danger signs I have most frequently observed: The owner gets too involved in outside activities. Sometimes it’s running a related business on the side. But it can just as likely be becoming too involved in community activities, church work or hobbies. I recall one owner whose business began a downhill spiral when he allowed business friends to talk him into running for mayor.He won the election, but the business lost its leader. A similar failure occurred when an owner became so involved in mission work that in just one year he traveled to Honduras on five different mission trips, helping build churches. He became so dedicated to helping the poor villagers that he neglected his business.
>>columns - Why Some Businesses Don’t Do Well
Bill Lee
Doing what I do for a living — business consultant and seminar leader — invites some very interesting questions from clients. One of the most frequently asked questions I hear is: “What are the ingredients that poorly run, barely profitable businesses have most in common?”
Each time I hear this question, it reminds me of a profound statement I once heard made by the late Jim Rohn, a Southern California businessman, speaker and lecturer: “Find out what unsuccessful people read and don’t read it. Find out what unsuccessful people do and don’t do it.”
Managers who ask me this question are looking for the kinds of behaviors to avoid. In other words, find out what the unprofitable businesses in your industry are doing and avoid doing it at all costs. You’ll have to agree that this approach makes a lot of sense.
Owner or manager indifference is the single most common factor I find among businesses that aren’t doing well. Businesses don’t run themselves. And the moment the individual accountable for managing the business makes the mistake of believing that the business can run itself — that he or she can sit back and relax — is many times the beginning of the end. At that point, profitability almost always begins to deteriorate.
Second generation-owners — and beyond — don’t always understand just how much effort their predecessors put into the business to make it as successful as it was when they turned over the reins to their successors. Successive generations often make the mistake of believing that all they have to do is open the doors each morning and the phones will start ringing. Customers will be on the other end of the line placing orders for a profitable mix of business and pay for their purchases by the due date.
Nothing could be further from the truth.
In today’s competitive environment, all owners have to do is show a few signs of indifference and before they know it, several of their best customers — and perhaps even a few key employees — will have defected. And all they have left are a few journeyman employees and the slow-pay customers that none of their competitors want.
The following are other danger signs I have most frequently observed:
The owner gets too involved in outside activities.
Sometimes it’s running a related business on the side. But it can just as likely be becoming too involved in community activities, church work or hobbies.
I recall one owner whose business began a downhill spiral when he allowed business friends to talk him into running for mayor. He won the election, but the business lost its leader.
A similar failure occurred when an owner became so involved in mission work that in just one year he traveled to Honduras on five different mission trips, helping build churches. He became so dedicated to helping the poor villagers that he neglected his business.
There’s certainly nothing wrong with either community involvement or church work, but a qualified manager should have been placed in charge of the business while the owner was focused elsewhere.
The owner passes the torch to a son or daughter who has never before been much more than a hired hand.
“Daddy” made all decisions, so the offspring never learned the decision-making process.
It’s not easy to make the transition from a multifunctional worker to CEO. Sure, the heir apparent may have mastered warehouse work, counter sales and a handful of the purchasing duties, but management acumen is not necessarily hereditary.
Moral of the story: Make sure that your heir is qualified to manage the business. If not, go to the outside and hire a professional manager to perpetuate the business.
The owner never took time to “professionalize” the business.
When I say “professionalize,” I’m including the following: Writing a proactive marketing plan, preparing and living within a well-thought-out operations budget, making sure all employees are well-trained, delegating accountability, naming and training a successor, putting a succession plan in writing, etc.
Failing to recruit a professional sales force.
As competition heats up, especially in metro markets, a journeyman sales force is rarely able to successfully compete for a larger and more sophisticated customer base. The quote-and-hope mentality no longer cuts the mustard. Professional selling skills and fire in the belly are essential in today’s marketplace.
Operating expenses are out of control.
Regardless of a business’ gross margin, operating expenses (as a percentage of sales) must be managed to 5-8 percent less than gross margin to allow the business to earn an optimal bottom line.
Don’t breath too much of your own exhaust.
Many owners and managers fail to budget time each year to travel outside their trade area and visit non competing businesses similar to theirs that are more successful than they are. Great ideas rarely come out of the blue and interrupt you; they must be sought out.
Regardless of the current state of your business, there’s always room to improve performance. Owners and managers who take their businesses too casually often become casualties.
Bill Lee is president of Lee Resources, Inc., a Greenville-based consulting and training organization and author of Gross Margin: 26 Factors Affecting Your Bottom Line and 30 Ways Managers Shoot Themselves in the Foot. For more information, call 864-248-4048 or e-mail: Bill@BillLeeOnLine.com
Previous Page Next Page
Publication List
