Volume 40, Issue 2 February 2005
Not-So-Lucky Number Seven
Follow these Steps and Business Failure is Certain
by George Hedley
Everything is changing! The economy and markets change every day. Housing is up, commercial has been down and public works construction changes with every election. As you get tossed about on this sea of constant change, most business fundamentals never change. Here are seven sure-fire ways to fail in business, no matter what else changes:
1. Do Everything, Everywhere, for Everyone (No written plan)
Companies that try to be everything for everyone spread themselves too thin, move in too many directions, and are too busy. They are in the “yes” business—“Yes, we can do that!” Companies that have a clear picture of the projects they do, the customers they want and the market in which they operate can succeed in today’s or any business environment.
2. Compete On Price (Nothing differentiates us)
Would you go to just any doctor for heart surgery? Customers want to hire experts who specialize in a specific type of project or service. When you claim to be an expert in everything, you’ll never get the job unless you are the lowest bidder. Customers pay more for experts. Why should your customers pay more for you? On what do you offer more than the minimum required per plans and specifications?
3. Hire Cheap (We can’t find any good people)
It is tempting to hire cheap people. But when you hire less experienced, less qualified, lower-paid employees while your business is growing, you are kidding yourself. These people require more supervision, which takes you away from making your business successful. When you spend all your time checking and helping junior people learn the business, you’re not spending your time where the money is made: with customers, looking for opportunities, inspiring and motivating your crews and on your bottom-line. Better people require little or no supervision and will allow you to do more business and make more money.
4. Do It Yourself (No written systems—It’s all in my head)
It is easier to do everything yourself than to try and get other people to do it for you. This control requires you to be everywhere to ensure everything is done perfectly. This also holds your company and people back from reaching their maximum potential. Replace yourself with checklists and systems to improve productivity so you can focus on your top business priorities.
5. Spend it All (Too busy to set financial goals)
Most business owners don’t sit down and write out their financial targets. More than 90 percent of all business owners reach age 65 with zero dollars net worth. This is a result of spending every dollar the company earns on overhead and salaries. The purpose of your business is to build equity and wealth for the owner and key management people, so they can eventually sell or pass on their business, retire and live off the income stream from the wealth created. Without clear targets and a plan for the future, the company will never fulfill this dream.
6. Too Big, Too Fast, With No Cash (No cash-flow controls)
It is too easy to grow your glass company by being the low bid. The number-one reason companies go broke is they outgrow their working capital. Before you take on more work than you can handle, make sure you’ve got the resources to do the work. Plan to have the additional overhead, personnel and equipment required to manage projects properly and get paid in a normal manner. Keep adequate reserves on hand in case payments get delayed. Most contractors need a minimum of 20 percent of their backlog in working capital to stay comfortable and afloat.
7. Go with the Flow (No marketing or sales plans)
Companies without a specific written marketing and sales plan tend to bid whatever comes in the door. This is a reactive approach to business and will not take you where you want to go. Successful companies have an ongoing approach to sales and methodically approach the markets and customers they want. Identify your top twenty customer targets and make them a priority.
The choice is yours: strive and thrive or fail and bail. Consider these seven factors to chart your future in any economy or business environment as it changes.
George Hedley owns a construction and development company and Hardhat Presentations in Costa Mesa, Calif.
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