Everything is changing in the business world today. The new reality of too much competition and too little profit has become an ongoing challenge. As you get tossed around on this sea of constant change, the basic business fundamentals remain the same. Here are seven surefire ways to fail in business if you don’t make the right moves fast.
1. Stay Busy
Trying to stay busy or keep your crews working is not a plan for success. Neither is jumping from one strategy to another every time the weather changes. During rollercoaster times, moving forward without a written plan is like building a house without blueprints. What’s your plan to stay in business and make a profit during the next three years, if your workload shrinks by 25 percent, 50 percent or more? No plans? You might as well burn your cash to keep warm.
2. Compete on Price
Companies that try to do anything and everything for every available customer spread themselves too thin and can’t make any money. They are in the “yes” business: “Yes, we can do that!” Would you go to any doctor for heart surgery? When you claim to be good at everything, you’ll never get the good projects unless you are the lowest bidder by a large margin. Customers pay more for expertise or specialists. What is your company known for? Why should customers pay more for your product or service?
3. Hire Cheap
It is tempting to hire cheap people. But when you hire less-experienced, less-qualified, and low-paid employees, you’re kidding yourself. Cheap people make more mistakes and require more supervision. This takes you away from making your business profitable. When you spend all your time checking and helping junior people learn, you’re not spending your time where the money is made: with customers, looking for opportunities, inspiring and motivating your crews, and on the 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
It’s easier to do everything yourself than to teach employees how to do it for you. This management style requires you to be everywhere to assure everything gets done perfectly. This also holds your company and people back from reaching their maximum potentials. Replace yourself with checklists and systems to improve productivity, so you can focus on your top business priorities.
5. Let Someone Else Manage your Money
Most small business owners don’t know their numbers or have financial targets. They work really hard and hope their numbers work out. Or, they let someone else worry about the finances. The purpose of your business is to make a profit. But with your head focused 100 percent on getting work done, you’ll never make any money. Get focused on your sales revenue, overhead, job costs, job profits and company profits.
6. Too Big, Too Fast, with No Cash
The No. 1 reason small companies go broke is that they outgrow their cash reserves. Before you take on more work than you can handle, assure you’ve got the capital resources to do the work. You would never start a donut store without at least $250,000 in the bank. Plan to have plenty of cash on hand for three to six months of overhead, personnel and equipment required to manage projects properly and get paid in a normal timeframe. Keep adequate reserves on hand, in case payments get delayed. Most builders need a minimum of 20 percent of their annual volume in working capital to stay afloat.
7. Go with the Flow
Companies without a specific written marketing and sales plan tend to bid or do whatever comes in the door. This is a reactive approach and will not take your company where you want it to go. Successful companies have an ongoing approach to sales, and methodically approach the markets and customers they want. Identify your top customer targets and make them a priority.
The choice is yours! Strive to thrive, or fail and bail! Consider these seven factors to chart your future in any changing economy or business climate.