4 Lies Business Owners Tell Themselves
Running a business is exhilarating but challenging. Positive self-talk and the ability to envision great opportunities in difficult times are important to achieving success and emotional stability. But these actions and attitudes can interfere with being honest about your business.
In the past year or so, I have spoken with business owners and managers who have accidentally fooled themselves. Their stories may seem familiar to the situations you are experiencing. Face the facts. Don’t delude yourself with these four common lies.
1. We don’t have to worry about the competition because we have a unique product.
A CEO with many years of experience believed that a proprietary technology would assure sole-supplier status in a lucrative, narrow space. It didn’t.
The harsh truth is that customers may not understand, need, or value the differences between your company’s solutions and those of your competitors. Cheaper versions that fulfill similar functions are preferable. Plus, if you happen to introduce innovation successfully and capture market share, competitors will be quick to follow and imitate you.
Sure, show up with your great product line, engineered to perfection. But anticipate a battle for your customer’s heart (and budget). Be relevant and useful to the customer in these ways:
- Pinpoint the functionality that customers need in each market segment (and integrate these functions into product design);
- Differentiate and package products in ways that are intuitive to use;
- Surround unique offerings with solid service.
2. We have air-tight procedures that drive our business operations.
A manager displayed pride in the integrity of her department’s procedures. She referenced them often and seemed vigilant about compliance.
A closer look revealed a much different story. Yes, written procedures had been painstakingly developed and introduced years before. Today, though, the once-living document is dead, buried in a virtual file cabinet. Comparing actual practices with the digital artifact revealed that while a few procedures were followed, most were ignored.
The scary truth is that the effort that you or your staff expend in documenting, creating, and refining procedures does not necessarily result in specific activities happening the way you envisioned.
Establish a routine for syncing procedures with day-to-day activities:
- Let changes in the world and your business – new technologies, forms of social media, government legislation, geographic expansion, process improvements, for example – serve as triggers for procedural updates.
- Refer to procedure manuals when you are training new employees.
- Compare manuals and real-world duties on a regular basis, at least once per year; revise as needed.
3. When things return to normal, our business will start growing again.
A couple of years ago, a friend mentioned that his boss kept morale high by saying that the company was well-positioned for growth. Investments in retail space appeared solid, despite an overall slowing of shopper traffic. Updates to product mix were popular, even as the competition refreshed and expanded its lines. New hires seemed sharp, welcome additions to business segments that showed promise in terms of profitability. But expenses continued to outpace revenue. Months later, the business folded.
The sad truth is that getting ready to succeed is not the same as actually succeeding, no matter how well the foundation is laid. Even upticks in the economy won’t boost profits to levels that sustain overloaded expense structure.
Be realistic and ready to make tough decisions:
- Be ruthless when evaluating revenue streams, cutting under-performing areas.
- Deal with problems now; situations will not improve through inaction even in great economic times.
- Realign resources rather than expanding staff, infrastructure, and technology investments.
- Get your finances in order, so that a slip in monthly performance doesn’t cause the entire organization to collapse.
- Confirm that your business model is viable. If not, make radical changes rather than incremental tweaks to restore sales and profitability.
4. Our vendors will stand by us until our company decides to end the relationship.
A logistics director recalled the time that a long-time vendor abandoned his company. Though he was prepared for a challenging negotiation when the contract came up for renewal, he didn’t anticipate the outcome. Discussions ended abruptly when the vendor refused to address service problems, a sign that the company had no intention of continuing the relationship.
The unfortunate truth is that vendors drop customers. Even a great rapport among buyers and sales representatives won’t sustain poor alignment between products and pricing desired by customers and those offered by vendors.
Luckily, being caught off guard did not disrupt operations. He called in favors from other vendors and signed a deal with a niche provider within six months. However, the transition period was rocky. He vowed never to become overly reliant on a single vendor by taking these steps:
- Develop a succession plan for vendors, similar to a management succession plan.
- Do the groundwork for adding new vendors.
- Pay attention to changes in the marketplace, noting market segments that are becoming more attractive as well as those that are becoming less appealing.
Optimism is essential to success, but needs to be grounded in facts rather than fantasy.