A little while back, we were working with a client that had to close its doors. It sucked for us, it sucked for management, it sucked for the employees, and it sucked for the board and the investors. As we collectively and individually went through the various stages of grief associated with the death of this company and what it meant to each of us, we considered our own individual roles in the closure and thought about what we could have done differently when managing this business.
This one was like the little train that could—until it couldn’t. A facility design flaw proved too much to overcome without major changes to the floorplan. A lot of people gave a lot to try to make it work, but in the end, it was not enough. Some lost money, some lost jobs, others lost dreams. It might seem odd that we are sharing this story as, obviously, failure is never the goal when building a new venture or taking an existing one in a different direction. Of course, we anticipate a certain number of defeats and setbacks along the journey—and we should.
How to Avoid Failure When Managing a Business
In an ongoing entity, good management—financial management a subset—is about making sure you can make mistakes if they are not catastrophic. In a startup environment, however, you may not have as much room for errors because they usually don’t have the inertia and resources that up-and-running companies do. Startups can be set up to allow failure if that one failure doesn’t jeopardize the supporting organizations or individuals. However, we forget that sometimes failure might be the result of all our efforts which, in turn, makes it is easy to ignore the warning signs or not perform the necessary reality checks.
When these catastrophic failures happen, we must learn and grow from them. But, perhaps more importantly, we also must be realists in assessing where we are at any given time. That means not believing our own press clippings, having a healthy level of paranoia about what is around the corner, digging into the numbers and listening when they have a contrary story to tell. Over the years we have seen just about anything and everything across companies we have worked with. While we, too, are always learning, our decades of experience have given us some insight into how to avoid this fate. Review the four tips below for managing a business.
Business Strategy: Know Where You are Going
Work with your management team to identify where the company is headed. So often we get caught up in doing the same things over and over—and trying to get better at them—that we don’t pick our head up to look at how our business landscape has changed or how our company should be changing. As leaders we need to challenge each other about why we are in business, what we can be great at, what we don’t want to do and what needs to change. From that, we can develop a clear set of goals.
Business Tactics: Have a Plan When Managing a Business
Have a dynamic, often-referenced business plan. Not one that sits on a shelf and collects dust. A one page business plan to create clarity around your goals. Have a set of projections with monthly balance sheet, income statements and cash flow that identify the resources needed and support those goals. Make your mistakes in a spreadsheet before you commit dollars and hours to unsustainable plans. Then every month, every quarter update them to reflect your new reality.
Business Execution: Carrying Your Plan Through
Back when I used to do a lot of scuba diving, the saying was “plan your dive, dive your plan”. Have KPI’s (key performance indicators) in place that measure your progress against your plans—just a handful at the top level. They are called “key” for a reason. Think along the lines of, “if I don’t do X, then my business will fail”. Measure your key indicators every week. Don’t wait until the end of the month. You need time to react if things are not going as you expected. If you execute on them, you will execute on the plan.
Business Evaluation: Adjust When Needed
The value of going through the above exercises is understanding the drivers, revenues, costs, and cash flows of your business. Every day we get one day smarter. When things are not aligned with your plan, dig into the numbers and identify why you are not getting the results you expect. Then, change what you need to get back on course. Believe the numbers even when they are not telling you what you want to hear. If your systems are good, your numbers are right, so trust them. Having the discipline to follow these four tips for managing a business will significantly increase your chances of success.
Moral of the Story for Managing a Business
Pay attention; don’t just go through the motions of management. Good leadership and management are hard work (or anyone could do it). We were entrusted with people’s lives and hard-earned money. We owe it to them to actively drive for success and look for the signs of success or failure and react when we recognize them. Fail, as long as it is not catastrophic. Fail again and again. Learn. Don’t let it hold you back from your next project, endeavor, or opportunity. As far as the company that we mentioned at the beginning, there is a chance that this company will be resurrected again under different ownership, or the assets sold to take on a new life. It’s the circle of entrepreneurial life.
Contact Us to Learn More Business Tips
Are you struggling to get your business on the right track to success? Are you finding it difficult to juggle the important financial responsibilities of your business, while fulfilling your sales and visionary duties as a business owner? Contact us to get the help you need. Our experienced, dedicated team of financial experts can offer the assistance needed to help your business thrive.