Are You Killing Your Company?

Businesses fail for lots of reasons. Sometimes, the reason is you. Find out how you could be killing your own company--and how to stop.

Businesses perish in untimely ways, many of which are largely out of an entrepreneur's control: There's too much competition. The public is no longer interested in your product or service. You're a victim of bad luck--you opened a business on the Gulf Coast a few weeks before Hurricane Katrina hit. Maybe a trusted employee has been cooking the books, or a family crisis is dragging you down.

But sometimes, the painful reality is that a business falls apart for one reason: you. In the end, when any company is suffering, there is a question every entrepreneur must ask when he or she looks in the mirror: Am I killing my own business?

We asked a number of experts for their thoughts on how we most commonly shoot ourselves in the foot. Although there are probably 500 or more methods to murder a multinational or strangle an S corporation in the dead of night, we agree that there are five ways it's most likely to happen.

Micromanaging
As the saying goes, the first step is recognizing you have a problem. Fine, but what are the signs? Margaret Morford, owner and president of The HR Edge, a management consulting firm in Brentwood, Tennessee, points to several subtle signs that your micromanaging is out of control. For instance:

  • "The people who work for you always present problems or issues, but never offer solutions," Morford says. The employees are probably wondering why they should bother when you always have the solution.
  • You have unusually high turnover.
  • No one ever turns in a project to you that you don't change in some way. "After a while, people will begin to turn in sloppy work because they know you are going to change it anyway," says Morford.

Rich Enos, co-founder of Boston-based StudySmart, a service that offers one-on-one tutoring for kindergarteners through 12th graders, recognized some of those signs (like high turnover) and soon learned his employees felt micromanaged. When Enos and co-founder Greg Zumas, 31 and 29, respectively, launched StudySmart in 2000, they did everything in the business. Naturally--they were a startup with no staff. But long after they added employees, they kept doing everything.

Enos and Zumas feel they've solved their problem of micromanaging by--you guessed it--micromanaging how they micromanage. Nowadays, Enos says, Study-Smart employees:

  • Understand what is expected of them through clearly defined goals.
  • Receive the training and resources needed to accomplish their goals.
  • Are given room to work toward those goals.
  • Report and assess progress toward their goals.
  • Expect coaching and additional oversight when it looks like performance will fall short of their goals, and recognition and increasing autonomy when goals are achieved.

Their several-step solution might look cumbersome, but if it allows the founders to focus on giving the staff room to work, that's the important thing. It seems to be working: StudySmart's employee retention is up, the company has opened offices in seven cities throughout the United States, and 2006 sales were approximately $3.2 million.

Whatever you do, it takes discipline to stop micromanaging, especially if you've trained your staff to come to you when there's a problem. When that happens, Morford offers an idea: "Every time someone presents you with a problem or issue, ask them, 'What do you think we should do about it?' If you do not like the suggestion, ask this as a follow-up: 'If we did that, what would you do about (fill in the blank here)?' Give them time to think. They will either fix your greatest objection, in which case you should implement their suggestion, or they will offer another one."

Spending in the wrong places
Peter D'Arruda, author of Financial Safari, has some advice for those trying to expand their business on limited funds: "Baby steps are more important than giant leaps. The old story The Tortoise and the Hare could be no clearer: Don't run when you can walk."

  • Work space: If you're in retail, "Perception is reality, and 'location, location, location' is the common saying," says D'Arruda. But if you can move into less expensive real estate without customers caring, why not?
  • Employees: "If you need the help and can justify the costs of hiring someone [new], by all means, hire away," says D'Arruda, but he adds that each employee brings about various forms of charges, from Social Security to workers' comp, so you need to factor those in when hiring new staff. "A good rule of thumb is that if you hire someone for $10 an hour, the true cost to you will be anywhere between $16 and $20 an hour after all the employee-related expenses."
  • Trade shows: "Many business owners get caught up in all the hype and glamour and 'specials' at these events and overcommit and purchase way too much," says D'Arruda. "Overordering can kill a business quickly."

It's helpful to know why you're spending money on items you don't need. You may be a victim of "expertise-creep," according to Jim Stroup, a management consultant and the author of Managing Leadership. It's the same malady that plagues micromanagers. "Entrepreneurs who have had an idea take off . . . sometimes, in the glow of the apparent validation of their wisdom, assume that that wisdom extends into every area involved in the business," says Stroup. "From marketing to accounting to operations and management, your pointed disregard of your friends' and advisors' suggestions can become pig-headed and self-destructive."

Chasing after every customer
It's a waste of resources to put all your time, energy and money into chasing after every possible customer. It's the "ideal customers" you should be trying to reach, says Michael Lovas, founder of About People, a Colbert, Washington, consulting and training firm that specializes in helping companies and entrepreneurs better understand, attract and connect with their clients.

Lovas says you should studiously attempt to learn what your more consistent consumers like about the products or services you offer. Make obtaining specific feedback from customers your priority, and whittle all that information down to the top three or five values--you'll eventually learn the most important quality that attracts customers to your company. "Once you have those words and phrases, you can begin to craft your marketing so that it is targeted specifically to people who value what your product or service represents," says Lovas.

What you really want is for your regular clientele to think of you as a partner in their life, rather than--to be blunt--a huckster hoping to make an easy buck off them. Olivia Fox Cabane, author of The Pocket Guide to Becoming a Superstar in Your Field, warns entrepreneurs about "trying to sell customers on anything. It's the fastest way to ruin a client-customer relationship before it even begins. People don't want to be sold to."
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Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

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This article was originally published in the March 2007 print edition of Entrepreneur with the headline: Dead Zone.

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