When leaders are pursuing growth, mistakes can be costly. Here are three of the biggest red flags to watch out for
One of the most fulfilling parts of leading a business is growing it successfully. It is a path that requires patience, because it can be full of challenges. Even companies with great products or services and huge potential can make mistakes that suppress growth, or worse, derail the business entirely. Here are three of the most common growth mistakes that a business leader should keep in mind – and try to avoid.
Shiny new toy syndrome
I once worked for a corporation where everyone was in terror when the boss went to a workshop or seminar, because she would regularly come back with the latest big new idea and want to change everything that was in place. Productivity plummeted during all the reorganizations that followed.
Stores put ‘shiny objects’ at the end of aisles and at checkout registers so as to gain attention and secure impulse purchases. It’s easy to mistake the shiny new thing as a trend. But today’s shiny toy becomes yesterday’s shiny toy when a new shiny toy comes along tomorrow.
In business, the result is a shift away from your goal and toward the thing that appears to be better. This causes short-term goal hopping and results in the unconscious abandonment of longer-term, strategic goals. My advice is to play with the shiny object before you implement anything. If it breaks down, doesn’t do what was claimed, or makes your life worse, drop it before it drops you.
This mistake can damage businesses in any industry. An airplane manufacturer cannot be so wrapped up in the ‘improvements’ built into its shiny new jet that it fails to put pilots through the usual flight simulators and train them fully. That path leads to injury, death, financial chaos, and a harmed reputation. Nor should a dog food manufacturer change their formula to what the researchers say offers superior nutrition and can be sold at a higher price until they test it out. What if dogs just don’t like the stuff?
Not tracking progress toward goals
There’s no sense having goals unless you have metrics: measurements of progress toward your goals. But reviewing progress quarterly (or even less often) is woefully insufficient. Do you check your car’s gas tank monthly, or wait to pay your mortgage quarterly? You’d run out of gas and out of credit.
Some business leaders and owners in particular fail to review their progress more often because they’re “too busy.” Busy doing what? What’s so important that it could possibly take precedence over monitoring performance against expectations?
Reviewing key metrics on a monthly basis will provide a good idea of business performance. But a quick weekly review, or even daily in some cases, is the best way to avoid surprises. You can identify negative trends before they do great damage, and exploit positives before they disappear. You can track expenditures as they are actually processed and reported. You can find out if you’re on, over, or under budget. You can compare the current status to last month’s and last year’s, and to your projection.
All of this provides peace of mind and the ability to actively work on the business, not merely in the business.
Excessive overhead will doom you
Nothing is as deadly for business growth (or even survival) as excessive debt, and nothing creates excessive debt as fast as payroll.
This is a huge dilemma for growing businesses: build staff and grow, or grow and build staff? For example, you say to yourself that you’re going to increase revenue by 10% by hiring three new salespeople. The three new salaries from hiring these salespeople make your business unprofitable.
Generally speaking, it takes at least three months for a new salesperson to become acclimatized to their job and start producing results. Therefore, you face the reality of losing money for at least the next three months, perhaps longer. This is a prime example of too much payroll expense for your business.
To manage this risk, make an organization chart that provides a visual representation of your business. In addition to their names in the box, place the employee’s total compensation alongside. This exercise helps you to understand if you’re getting the return that you anticipated from that employee’s efforts. Return on investment applies to your individual employees, not just your investment in the business as a whole.
Another area to be aware of during a period of growth is the cost of office space and furniture. Opt for the less extravagant over the luxury office space. The additional outlay will not drive additional sales; those resources would be better spent on sales and marketing efforts. There will be plenty of time for more elegant offices later, when you have successfully grown. As for free lunches, massages, snacks, and other perks, find the happy medium for your pocketbook.
Too much overhead when trying to grow your business is like having a 100-pound pack on your back. You can never get to full speed.
Keep it simple
By doing your best to avoid these three common growth mistakes, you will be in a better position to reach your business growth goals. Growing a business successfully does not need to be complicated. Keep it simple!
Manny Skevofilax is a consultant, speaker, and author of Ultimate Profit Management: Maximizing Profitability as You Grow Your Business (Productivity Press)