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This one mistake is why most business owners struggle
This one mistake is why most business owners struggle.
By: KC Truby
EVERYTHING you’ve read about business failure is the same stuff I shoveled out of the bull pen when I was a kid.
The SBA and most business writers will tell you that the two top reasons a business fails is because of inept management or undercapitalization. What a manure spreader full of crap. Of course it was inept management, making mistakes until they ran out of money.
Here is why owners struggle in 96% of the small companies they run. The owner commits the ‘sin of the inaccurate assumption.’ That means they are operating there business based on a belief that is simply not true.
Misreading the data or guessing as my grandpa would call it leads to mistakes like…
✓ If I lower my price, I will get a lot more customers.
✓ If we keep ‘Bob’ on another few months maybe his performance will turn around.
✓ My biggest client wants another 10% discount, I have to give it to him or we’ll run out of work.
✓ If we just spent another 4 hours a day on our web site the sales will start flooding in.
When we go into a business, we look for the inaccurate assumptions. Most of them have to do with marketing or sales. So we’ll comb through the prices charged to the best customers with attention to the profit margins. We look for advertising money spent without results. But most important we find out what the sales team, including the owner, spent most of their time on.
If we can figure out the ‘inaccurate assumptions’ then we feel very good about moving forward with an acquisition. Because now we know what put the owner behind the eight ball. We simply make notes to not repeat the error.
Often times we need to interview the owner and the top employees to get a clear picture. The question we use is “Looking back, where do you think you spent your time and money that did not pay off?” About half the time we get a pretty good answer.
But be aware, the owner does not want to admit mistakes so they may gloss over any participation they personally had with a bad investment of time and money. DO NOT hold them accountable in your tone or words. They are in a bad enough spot, so be kind and soft when you find the mistakes. Keep it to yourself and do not brag about how smart you are to find the error and how you’re going to fix it.