“Why do business owners, who have grown their companies successfully, then go ahead and do silly things?”
Far too often the answer is “Well it seemed like a good idea at the time…….”
To be fair, we get to look at the outcome with the gift of perfect hindsight. But it happens often.
Why? Let’s take a look at 2 companies.
In only 5 years, three friends built a retail business to $50 million in annual sales.
Then they hired an experienced executive to be their President. He thought they should start selling a product which complimented their core offering. The founders agreed and the company charged ahead.
They had to change the format of their retail outlets but that was just a tweak to the original strategy, right?
Unfortunately, they underpriced the new product and sold it on credit. Their original business was cash only and many traditional customers turned out to be poor credit risks.
In less than a year the new venture had tanked. Because the founders had been absorbed in saving it, the core business took a massive dive too. And it was expensive to get out of those new leases.
It took several years to recover.
An established supplier of skin-care products, it sells via independent sales ‘consultants’.
To continue growing, the owners had to make a choice. Use temporary, short-term bonuses to motivate average performers. Or analyze the top performers and train everyone on their techniques.
They tested both alternatives.
Performance dropped immediately the short-term bonuses stopped. But sales, in a tough market, grew when they trained everyone on the top sellers’ techniques.
So they gradually rolled the training out throughout the company.
The mistakes (or lessons)
- If you survive the first few years and have strong year over year growth – your strategy is working.
- You may still have to adjust it if there’s new competition, changing customer demand, technological innovation or all three.
- But you’re no longer a start up, so you can’t bet the farm tinkering with alternatives while neglecting the strategy that works.
- However, you’re not a big corporation (yet) with enough resources to experiment with several new strategies at once.
- So, continuing to run and build the core business has to be #1 priority. Innovations and changes have to be tested on a small scale to mitigate risk
Company B did it. Can you?
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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn