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Value Creation Blog

Four Reasons Companies In Trouble Stay In Trouble

Posted by Josh Patrick

Sinking ship resized 600I occasionally get phone calls from people who have businesses in trouble.  They are calling to get my help to “fix” their problems.  I usually stay away from these engagements because the problem is the owner of the company and I’ve not found a way of fixing owners.  I find there are often similar things that are true when a company is in trouble. 

The business doesn’t have a business model that creates cash.  Small companies all run on cash.  Owners often don’t understand that without cash their company won’t run.  At least they don’t understand this until it’s too late. 

I recommend that you put a strong cash management system in so you know when a cash crunch is coming.  That way if you know you’re going to be short on cash you can do something about it.

The owner doesn’t listen to others.  It’s great being the boss.  You get to do whatever you want to do.   This is where owners will get into trouble.  They believe they know what should be done and aren’t willing to listen to the advice of others.

Employees are likely to never tell you what they really believe.  Employees know that their boss can fire them at any time.  Autocratic bosses have let it be known with non-verbal language cues that they don’t want anyone to disagree with them.  These owners often get themselves and their business in trouble.

The business doesn’t have focus.  It’s rare I see a business where potential customers are turned down.  Small businesses that try to be all things to all people will have a high cost of operation.  It’s expensive to re-invent the wheel every time you service a new customer. 

Businesses that believe there aren’t enough customers in the world will take customers because they’re afraid they won’t create enough sales.  When a business takes all comers they end up having no focus.  Employees don’t develop an expertise in serving a particular type of customer.  Serving different market segments and niches require different skills.  Focus on one type of customer allows a business to provide efficient service that is more cost effective than the business that accepts business from anyone.

The business doesn’t know what drives profits and cash.  Every business will have drivers that make it better at what it does.  Those drivers usually aren’t measured in the profit and loss statement of a company:  In a bakery it could be what items sell at different times of the year, at a ski area it might be what is the weather in the closest major city, and a manufacturing plant might be production per hour of its line workers.

Every business has its own numbers that are key to that businesses success.  I see too many businesses where the key people in the company don’t have any idea what those key numbers are. 

One of my beliefs is that everyone in a company should have a number that is particular to what they do.  When everyone has a number you know that management has thought deeply about what it is that drives success in that business.

Have you thought about your business and what drives success for you? 

In the coaching part of our work we work on all four areas above.  We have a special program that allows you think strategically about your business.  Part of the process of getting this report is having a complementary coaching call with us.  Both the call and the report won’t cost you anything except your time.  Click on the button below to sign up for our strategic business overview.

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Topics: business coaching, strategic planning, Key Performance Indicators (KPI)

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