Small business owners accumulate tribal knowledge about how to run their companies. These are things they have assumed over time and assume to be true, but simply are not working. Here are the top ten bad business assumptions, and how to correct each of them.
1. How many times have you heard “The customer is always right?” If the customer was always right, they would starve every company out of business! Running a business at the whim of the customer will never lead to a stable and profitable company. However, it is important to view your company through your customers’ eyes. Look at your competition from their point of view. Listen and empathize with your customer to gain their perspective of what success looks like and build rapport. Then, set their expectations from the start so you and your customer both know when you are meeting or exceeding them. Remember the golden rule?
2. Build it, and they will come. Just because you build it does not mean customers will automatically line up to buy your product or service. This is where most small business owners forget to focus. Research and develop your value proposition. Know your market, both local and regional. Build name recognition and an excellent reputation. Stay abreast of legal, political and economic pressures in your industry.
3. Most small companies seem to focus on the sales total or thinking sales numbers are the most important number in measuring financial performance. Have you heard the saying “sales are vanity, cash flow is sanity”. Successful small business owners learn to focus on cash flow and know how to read and act on the information in the cash flow statement.
4. Small businesses are generally run by entrepreneurial opportunists who think that team work is about building consensus. While the success of the company does depend on building a great team, let’s not get confused, consensus is not the same thing as collaboration. The leader sets the direction and ethical standard and the team needs to be able to effectively work together to accomplish that objective. Anything other than this creates conflict, disconnects and poor service.
5. Financial statements are the company’s score card. If the owner does not know where they have been, how can they know where they are going? Profit and loss, balance sheets and cash flow statements need to be reviewed and understood every month! Some reports may need to be reviewed weekly or even daily! How can you reach your goals if you don’t ever set or measure them?
6. The sales group assume customers only care about low prices. Some companies in the country deliver low price and great customer service like Family Dollar, Wal-Mart, and Amazon. Small business owners often can not be successful competing on price. They need to focus on the value their products and services brings to solving the needs of the customer.
7. If a company sets the expectations of the customer too low, and then subsequently exceeds them, do you think their satisfaction goes up? The truth is that if the expectations are set too low, the company will not have the opportunity to get the customer’s business.
8. Success is about making money. Sure, it’s one of the ways to keep score, but if the small business owner focuses on getting rich, then he will never achieve it. Build cash reserves, value, and cash flow from the company, and the financial rewards will always come.
9. Do you really have to spend money to make money? The truth is that too much money can actually make the business owner stupid! Strong words but throwing money at a problem is wasteful and not the answer to any solution. Spend money carefully and measure each investment’s results, even if it is entertainment.
10. Social media can be a world wide web waste of time. The small business owner should find out where his customers’ and prospects’ are hanging out online. Then, focus on that tool to become part of that click. Did you know that in a typical business, on average, less than 15% of employees need access to the internet, only 30% need external email and only 50% need a phone! How much time, among your employees, is wasted on eBay, Facebook, Monster, Amazon, etc., that you are paying for? What about personal calls?
Common Small Business Blunders
Decisions, decisions!
I’m currently in a state of indecision. Do I have too many options? Are my priorities out of order? No, usually it is because I have to choose between what I want and what is best or the risk is high and the gain is unsure. Do you ever go with your gut or go with the flow? Do you make snap decisions? Do you have a process to make decisions? I’m not talking about small decisions. I am talking about those life changing decisions that your going to live with for a long time. Have you ever wanted to kick yourself for a bad decision. Is your decision making process clouded by greed, beauty, pride or fear? Don’t beat yourself up too bad. These are the four major bad decision magnets. There are many minor bad decision magnets like hunger, discomfort, stress, love, allegiances, impatience…etc. The truth is we are all a little different when it comes to which magnets cause us the most problems. Have you recognized that you may have a problem making bad big decisions? Have you been able to figure out which group of magnets are forcing you into bad decisions? My current indecision is based on knowing my magnets and my sense that they are pulling hard! I know it’s time to bring out my personal decision matrix and proceed with caution. Each person’s decision matrix should be built through experience and analysis of your past bad decisions. If you know you have weaknesses, build in protection against these forces. My personal matrix looks something like this…
1. How much is it going to cost?
2. How much is it going to continue to cost?
3. Is it ethical?
4. Is it legal?
5. Am I going to realize a benefit?
6. Is it too good to be true?
7. Do I have enough credible information?
8. Have I sought trusted counsel?
9. Do I feel I am being pressured?
10. Is it safe for me, my family, my employees, and the public?
Obviously, most of my questions are wholistic and therefore have degrees. On a scale of one to five, each selection has a specific meaning and several questions are basic reminders to check it out first.
I challenge you to consider your past decision making skills and make an effort to continuously improve your results. If you are habitually making poor financial or business decisions, don’t just read this blog but get some good counsel from someone you trust. There is a better life waiting for you.
Real Leadership
There have been many books, seminars, classes, articles and blogs about this highly needed subject. But, in reality, it is as simple as faith. Let me explain. First, there has to be a VISION of the FUTURE where the leader has the paramount determination to ACHIEVE the vision. Second, and most importantly, there has to be FOLLOWERSHIP. This is the most ignored and the most critical part of REAL LEADERSHIP. For example; if as a business owner, my vision is “I just want to be rich!,” then I am not going to create followership. Instead, I will create a dictatorship which is not a modern example of good leadership, no matter how much I want people to think of me as a great leader. Therefore, it seems that true leadership requires a virtuous vision which has a cause greater than making the “leader” more money or more powerful or give him a greater EGO. It has to create an atmosphere of followership. A mission that everyone can believe in and have FAITH that it is achievable if we ALL do the BEST we can and hold each other ACCOUNTABLE we will get there. But, the vision requires a leader and the leader requires followers. Since the abolishment of slavery, all followers are really volunteers and should be treated as such and if employed they should be rewarded according to the value of thier contribution. Finally, what basic traits do the most successful leaders share? In my experience you must activily and contiously improve your own integrity of character, sense of responsibilty, professional competence, enthusiasm, emotional stabiity, self confidence and humaneness. I challenge you to SCORE yourself on each trait and start today on you personal Trait Improvement Program (TIP). To daily exercise your leadership abilities, improve in these areas; Know your job, know your people, keep your people informed, develop teamwork, plan your missions to achieve your vision, Develop your followers, be an example through demonstration, make sound and timely decisions, develop responsibility and accountability in your followers and have the COURAGE of your CONVICTIONS. It may seem daunting but have faith and don’t quit because the only way to truly lose is to quit. Start living LARGE!
Respectfully submitted,
Gary Turner
GT Consulting Group
