Not Promoting From Within? Ignoring Financial Statements? Don't Be Stupid.
As an entrepreneur, it’s easy to fall into the cliché of not seeing the forest through the trees. That often shows up in the form of doing really stupid things in your business that you would probably tell another business owner not to do.
Here are some of the top stupid things that companies do, so you can avoid the same fate.
1. Not promoting from within
Companies that have great people on staff and grow often look to the outside first to fill new positions. This means that loyal, skilled employees who know and understand the company end up feeling badly about themselves. They also feel under-appreciated and end up quitting, leaving you two positions to fill.
It can be a challenge to view a person who has always done a certain set of tasks or held one position in a different light, but you are doing your business a disservice not to create opportunities for advancement for your strongest employees.
2. Not taking a portfolio approach
I have seen time and time again where business owners -- especially small-business owners -- look at sales or profits of one product or service versus the sales and profitability of the business as a whole. Sometimes, you may have to take a lower profit or a lesser margin or even sell less of a particular product or service to make customers happy, get them in to your store and / or keep them doing business with you.
Big businesses know taking a loss on some products (called “loss leaders”) to get people in their stores to buy higher-margin products can work. If you have a product or service that ends up being too high to be commercially viable, and you can’t scrap it, try to make up the difference on another product or service. Looking not just at individual offerings but the impact of the business as a whole can make a tremendous difference.
3. Not focusing on your best customers
I’m sure you have heard the old adage that a bird in the hand is worth two in the bush. Well, many entrepreneurs ignore this. They spend so much time trying to find new customers that they forget about the birds in hand -- their existing customers.
If you have customers that already love you, nurture those relationships to get more business from them -- and have them refer their contacts as well. I constantly see businesses that offer discounts for new customers only. How do you think that makes your loyal customers feel? I’m not saying to forgo new customer efforts, but make sure that you take fantastic care of those already supporting you.
Moreover, amongst your existing customers and clients, there are probably a small number that account for the majority of your sales. Make sure that you expend extra effort on making those customers happy, as a loss of those customers will have a material negative impact on the business.
4. Financial statement ignorance
One of the top areas of neglect for entrepreneurs is in financial statements. Many small-business owners don’t pay attention to financial statements or, worse yet, don’t even do them on a regular basis. In fact, a lot of business owners think credit card and checking account statements qualify as financial statements. Being lazy in this area can spell ruin for business owners.
Financial statements can show you what is working and what isn’t, where expenses are running amok and even cash flow issues. If you don’t understand the financial statements, hire someone else to do them and to teach you what to look for. Ignoring your financial statements can put your business in serious jeopardy.
5. Systems? What systems?
Businesses that have consistency are more efficient and effective. Yet, small-business owners sometimes run their operations in an ad-hoc way. Whether you go old school with employee checklists or use technology for automation, every function in your business should be systematized.
This will prevent you from constantly recreating the wheel -- especially in times of employee turnover -- and provide more consistency in your products and services. How do you answer the phone? How do you proceed through a project? What’s your follow-up procedure? This should all be documented with an easy-to-follow system. Systems like these will allow you to put more of your (and possibly your staff’s) focus on revenue-generating activities in the business.
Carol Roth is the creator of the Future File™ legacy planning system, a “recovering” investment banker, business advisor, entrepreneur and best-selling author. She is also a reality TV show judge, media contributor and host of Microsoft’s Office Small Business Academy. A small business expert, Roth has worked with companies of all sizes on everything from strategy to content creation and marketing to raising capital. She’s been a public company director and invests in mid-stage companies, as well.