|
|
|||
|---|---|---|---|
|
|||
 |
|||
| Home | Library | Links | Forum | Knowledge Tools | About Us | |||
|
|
The Seven Deadly Sins Of Business After selling off his stake in Mitel Corp., Ottawa entrepreneur Michael Cowpland wanted to start a business selling printers for a certain brand of word-processing equipment. He backed off fast when he learned that most of the owners of those systems hated them so much they refused to invest another cent in them. When Toronto fashion retailer Sporting Life was just six months old, co-founder David Russell got into an argument with a customer trying to take unfair advantage of the store’s generous refund policy. When he realized that staff and shoppers were all watching him, Russell changed his tune and granted the refund. For a business founded on quality customer service, he had been sending the wrong message. We hear so much about successful entrepreneurs and business tycoons that sometimes it’s easy to forget how tough running a business is. There are so many tasks to master - from production and operations to marketing, finance and human resources - and so many decision points along the way. In a dozen years editing PROFIT, Canada’s premier magazine for small business, I learned that all business owners make mistakes. In fact, the same ones crop up again and again. The goal is not so much to avoid mistakes as to recognize them early on - and make sure you minimize the damage before they can threaten your business’s health. In my experience, here are seven of the most deadly - and common - mistakes made by Canadian business owners. No. 1: Losing focus. Probably the most common single reason for business failure is a lack of focus. Forgetting what made them successful, many companies make ill-planned forays into new products, or lose touch with how their markets are changing. Examples are legion. A software company that expanded into online information services was totally unprepared for the hardware problems it would face or the millions of dollars needed to woo subscribers. A law firm neglected the changing needs of its market and became overweighted with expensive, non-specialist senior partners. Typical, too, is Toronto-based Meridian Technologies Inc., a high-tech company that once had interests in software, computers, satellite technology, solar energy and die castings. “There was never enough expertise to deal with several fronts at once,” admitted founder Scott Griffin after the company finally cut back to just one specialty: magnesium auto parts. His regret: “If I had the last nine years to do over again, I would have focussed the company a lot earlier.” How do you focus your company on the right business? Remember what got you where you are. Stay in touch with your market to ensure you’re offering the best value proposition. Keep watching for new opportunities, but make sure they match your expertise - and be ready to cut your losses if fortune turns fickle. You can’t stand still in business, but you can’t afford too many wrong moves, either. As president and co-CEO of Toronto-based Spin Master Ltd., Canada’s fastest-growing toymaker, Anton Rabie is always searching for market intelligence to help him plot Spin Master’s next move. He recently told a Toronto audience that whenever he meets with retailers or other business partners, he poses such questions as “What are you seeing that’s new?” and “What has excited you most in the past 10 days?” Rabie spends one week every two months prowling toyshops across North America. And he regularly visits a favorite toy store in Toronto, after hours, to chat with the owner about new trends and opportunities. No. 2. Developing “King Arthur’s disease” Everyone has met business owners who have let a little success go straight to their head. Forgetting that success stems equally from staff, customers, timing and luck, many business owners develop a high opinion of their own brilliance. They neglect market research. They refuse to delegate. They stop listening. Vancouver entrepreneur Peter Thomas, the founder of Century 21 Canada, uses the term “King Arthur’s disease” to describe the feeling of invincibility some entrepreneurs experience after their first flush of success. “They credit themselves and not the market,” he says. Thomas knows this from experience. In the early 1980s, he was buying and flipping real estate across North America. But he was so busy dealing that he didn’t realize how exposed he was. When the market collapsed, he found himself $30 million in debt. To avoid King Arthur-itis, you could form your own roundtable -- of trusted advisers. Harvey Schilke, president of London, Ont. systems integrator Protek Systems, consults an informal advisory board comprising his lawyer, accountant and business associates. He welcomes their objectivity and says their experience lets them warn him when he’s about to do something dubious, such as expand into markets he knows nothing about. No. 3: Undercapitalization Simply put, most small businesses don’t have enough capital behind them. As a result, they can’t afford to invest in product development, new equipment, better furnishings or more staff. And they’re sitting ducks for when the economy turns tight or their bank gets cold feet. It’s not always the entrepreneur’s fault. Unless you’re a high-tech firm or a manufacturer with signed contracts in hand, you’re unlikely to attract much interest from venture capitalists (VCs) or other equity investors. That means most businesses must depend on personal savings, capital from friends or family, and bank loans. Kelowna, B.C.’s Al Hildebrandt is one of many entrepreneurs who depended too much on the banks. To boost sales of his staff-scheduling software, he accepted an offer from a bank to double his line of credit. But when the tech boom faded, the bank was quick to demand its $2 million money back. Hildebrandt’s company declared bankruptcy, and was later sold off to the highest bidder. Now working on a second software firm, Hildrebrandt vows to pay much more attention to his new company’s capital structure. Of course, there is money for small business, but you have to work through a maze of sources, from factors and mezzanine lenders to merchant banks, VCs and the Business Development Bank. You can find information and handy links to many of these organizations through BusinessGateway.ca. Business owners should pay special attention to angel investors - individuals in your community with substantial personal savings and an appetite for risk. Many are successful or former entrepreneurs, eager to invest in promising local businesses and recapture the thrill of growth. But money always comes at a price. Angels normally expect double-digit returns, and a say in running the company. To learn more, check out www.angelinvestor.ca, which has useful information and links to local angel groups. No. 4: Not seeking out feedback on your management style and performance Tom Stoyan, a consultant in Woodbridge who bills himself as “Canada’s Sales Coach,” has coached nearly 300 presidents and CEOs. He tries to make them understand that the best way for a business to succeed is for everyone on staff to keep improving their skills. “The company will never do better unless we get better as individuals,” says Stoyan. But that starts at the top, he says: “If I don’t ask for more feedback, it’s tough for me to get better.” Stoyan believes that bosses should meet with their key reports every week to share feedback and strengthen rapport. He offers three “trust-building questions” to fire up employees and identify potential problems. 1) “What one thing have I done in the last week to help you do your job more effectively?” 2) “What one thing in the past week have I done that has prevented you from doing your job more effectively?” 3) “What one thing do you need from me to do an even more effective job next week?” An employer’s most powerful management tool, says Stoyan, is the question, “What can I do to help?” If you ask questions such as these, he says, “you’ll know where you’re making a difference and where you’re getting in the way.” No. 5: Not focusing on the highest-priority tasks Everyone has “To-Do” lists, but too few prioritize them - and even fewer reprioritize them twice a day as situations change. “You start with a plan in the morning,” says Tom Stoyan, “but by noon two major crises and an opportunity have come through the door.” Stoyan believes that business today moves so fast that entrepreneurs need to constantly review their priorities to ensure they are working on their most important task at any given time. The most common mistakes: executives stick with yesterday’s to-do list, or try to get more done by tackling their easiest jobs first. “As far as I know,” he jokes, “no one is paying you to stroke things off as list.” Prioritizing pays. At one financial institution where Stoyan has been coaching managers, he says sales have grown by a half-million dollars a month since they learned to take a few minutes every day to “focus and refocus.” No. 6: Neglecting customer service. Almost everyone has a customer-service horror story, whether it involves the courier who can’t find your office or the parts supplier who is out of stock until January. The problem: many companies fail to stress the importance of customer satisfaction to their front-line staff, or have cut back training programs that would help employees serve their customers better. Seven years ago, PROFIT Magazine hired two “mystery shoppers” to check out customer-service levels at Toronto stores. They found a litany of rude retailers and somnolent sales staff. Two-thirds of the retailers they visited got an “F” for indifferent service. Despite all the rhetoric we hear about customer service, things haven’t gotten much better. When PROFIT repeated its experiment last year, seven retailers flunked out of 13. How do you encourage better service? Make sure staff know it’s your priority. Give them the training they need to be helpful, ask the right questions, and close a sale. And then hire your own mystery shoppers to see how well they’re doing. No. 7: Overspending on everything. Most companies “leak money” due to overpayments to suppliers, outdated contracts and inattention to details, says Ross Pinkerton of Toronto-based Expense Reduction Analysts. He says strategic expense reductions can cut supply costs by 20% -- saving that goes straight to the bottom line. ERA helps businesses mine that hidden gold by scrutinizing invoices, reviewing contracts and renegotiating prices. Its experts recently helped one company cut its $1-million janitorial budget by $200,000 a year, with no reduction in service. How do you save this kind of cash? You must take time to understand your current supplier arrangements, question every price increase, solicit quotes from competing vendors in order to negotiate better deals, and show employees that saving money matters. “Promote cost-cutting as a positive activity in your company,” says Pinkerton, “not something that should be looked at with trepidation or fear.” Mistakes are easy - getting things right is hard. But the business you save could be your own. © 2004 Rick Spence Reprinted from the Toronto Star, October 2003
|
||
| Home | Library | Links | Forum | Knowledge Tools | About Us Copyright 2004-2009 Teamstart | |||