How to Sidestep Disaster

printer Printer Friendly Version

Author John Towler, Ph.D.

Ideas for good business management

It has often been said that we learn from our mistakes, and since we all seem to make so many, this adage can be very beneficial if we put it to good use.

Businesses are no different and all too many businesses have failed because of their mistakes. However, if we can learn from their errors, we can increase our own chances of success.

What follows is a review of some of the most common goofs that lead a business into deep trouble and eventual failure.

Let enthusiasm run rampant

Whether you are starting up a business, developing a new product or service or simply reorganizing a department, there is a very real danger in letting your enthusiasm run away with you. You must be enthusiastic and optimistic or you wouldn’t be launching a new venture, but the danger is that enthusiasm could cloud your judgement.

Be realistic. Too many firms have failed because they got carried away. Just because you love french-fried cucumbers doesn’t mean that you should sink your life savings into a quick delivery cucumber shop.

Do not have a business plan

Even though weddings, bar mitzvahs and cocktail parties are planned in advance, you would be amazed at how many businesses fly by the seat of their pants. Having a plan means thinking out what you want to do, how you want to do it, how you will make it happen and even such mundane matters as how much profit you want to make.

Not having a plan means that since you have no defined goals, any place you end up must be okay, if indeed you even know when you have arrived. If you don’t know how to develop a first class, thorough business plan, learn how to do so or hire someone to help you.

Be secretive, avoid advice

The road to ruin is littered with the bodies of business people who figured that they knew it all, that no one could tell them anything and that what they didn’t know couldn’t hurt them. In this complex world of ours no one can hope to be an expert in everything, and this certainly applies to the business world.

The good news is that there are more experts and professionals out there to assist you than ever before. Whether it is a question of what kind of machine to use, the best computer software to buy, how to set up a staff benefit plan, or how to develop a marketing plan, there are people who know more than you do and who have more expertise in that area than you will ever have. Failing to call upon them just doesn’t make sense.

Underfinance your operation

Even if all your plans are in order, misjudging the financial cost of doing business can put you under. Again, your enthusiasm may kill you. Set the horror floor and base your financial requirements on the worst-case scenario. Assume that you will only do half as well as you hope.

Do you have the financial resources in place to carry you until you can turn things around? Many businesses have found themselves in deep trouble when their hopes don’t pan out and their creditors demand payments.

Ignore staffing and training

One salesperson, short order cook, driver or whatever is the same as another, right? How wrong you are! Any business is only as good as the people who are part of it. A poorly selected employee or even a good one who is inadequately trained can do your business more harm than almost anything else.

The surly salesman who turns customers off, the clerk who makes mistakes at the cash register, the argumentative driver who irritates your clients, or the comptroller who is beyond her depth can quietly sabotage your best laid plans.

When Andrew Carnegie was asked how he became so wealthy, he replied, “I always hire people who are smarter than I am.” You can’t afford to hire anything but the best and to train them to become even better.

Ignore your customers

This one is so simple that it may seem ludicrous even to mention, but you would be amazed at how many businesses either don’t know who their customers are or how to treat them. Who really buys your products or services? How old are they? What is their educational level? Where do they live? What is their lifestyle?

You should know the answers to these and a host of other questions if you want to stay in business. This is the information society and you must learn how to get it and use it. There are simple, cost effective ways to find out exactly who your customers are and what they want. You must not only know about your customers, but also treat them properly. Again, this seems like common sense, but it is a major reason for failure in many businesses. Train your staff to give the best possible service and make sure it is better than your competition. A dissatisfied customer seldom complains to you, he or she just won’t deal with you again. However, they will complain to others and studies have shown that the complaints are likely to reach the ears of at least twenty other people. Hence, one dissatisfied person can cost you twenty potential customers. On the other hand, a satisfied client will tell at least one other person about you and will continue to do business with you.

Believe busy means profit

Some businesses seem to be busy, going full tilt with a staff that’s run off their feet. Yet within a short while they are bankrupt. What went wrong? They simply didn’t watch the numbers. They thought being busy meant they were making money.

One fast food outlet was delighted with their rapid growth. More and more people were coming in every day and the cash was positively flooding in. However, they were out of business in a few months because they had not realized that their pricing was wrong, their wages out of line and that in fact by selling more and adding more staff, they were getting deeper and deeper into a hole. The moral is, watch your costs.

Use old or existing technology

There seems to be an inertia factor that operates to prevent a business from using technology to give it a competitive edge. That old machine may seem to be efficient, but even an investment of several hundred thousand dollars could pay off in better quality, greater productivity, higher customer satisfaction and better profits.

The application of up-to-date techniques and the use of computers can pay off for you in ways you may not appreciate. Many people who have not grown up with computers are not comfortable with them and fail to see what they can do.

A case point was a woman who owned a highly successful shop that sold used designer clothing. The problem of keeping track of the more than 2,000 clients each of whom brought her several garments became monumental. The staff time required to write up and maintain records shot the cost of operation through the roof.

The owner had no experience or knowledge with computers, but she wisely hired someone who set up a simple computer system that enabled the staff to record garments as they came in and the sales as they went out. The expenditure of a few thousand dollars for a computer, some software and staff training resulted in greater efficiency, better working conditions for everyone and higher profits. Now knowing about technology is no excuse for not adopting it.

Ignore internal conflicts

An old and perhaps trite saying is that if you take care of the little problems they never grow to become big ones. How true this is and where it applies to people, it is a rule of operation that cannot be ignored. It takes only one or two disgruntled and discontent employees to start an internal riot that can spread throughout your firm.

It is absolutely irrelevant that you think their problem is ridiculous, unwarranted or of little importance. It most certainly is not this way to them and the danger is that unless you listen and do something, you will have a major problem on your hands.

All too many companies have found themselves unionized because they didn’t listen or didn’t pay attention to what their employees are telling them. One firm with a loyal and stable workforce received a report from their supervisors about conditions and practices that were causing dissension. The managers thanked them for their efforts and did nothing. Within three years a union was in place and guess what issues appeared in the first set of negotiations? The same items presented to the managers three years before!

Companies that fail to recognize the value of their people usually end up in trouble and the shame of it is, it all could have been avoided so easily. People are the backbone of any operation and they are a resource that is usually under-utilized, poorly recognized and improperly supported. The best and most successful firms are the ones that realize that most of their assets go home every night.

There are many more ways to ruin a business, but these are some of the more common ones. Regardless of the business you are in, you can be more successful by learning from the mistakes of others.

John Towler is a Psychologist and the founder of Creative Organizational Design. Please send comments about this article to jtowler@creativeorgdesign.com. For more information, please contact us.

Re-printable with permission.