Here’s the reality: companies make mistakes all the time. In an economic downturn, however, avoiding the big slip ups becomes all the more crucial. Small business owners tend to react impulsively at times, and while this may earn them some points for courage, in a rough economy they should definitely take the long view and pace themselves. To get funded, stay funded, and even out stretch your day-to-day cash flow, you’ll need to avoid some key mistakes. If you’ve made them already, it’s time for a strong course-correction.
Here are my top five blunders to absolutely avoid during a downturn.
#1 Hasty Hiring. Result? Bad hires who are costly and time consuming. It’s better to try out new staff members as independent contractors first. Then, after you’re confident that they work well with your team and within your organization, bring them on as permanent hires. When you’re overwhelmed and overworked, it’s easy to make hiring mistakes. That’s why relying on independent contractors is a great policy. Check out sites like www.asksunday.com for administrative help. They have great buzz and a wide variety of hourly rates to work with (in some cases $12 per hour). For marketing, bookkeeping and other help, try out www.workaholicsforhire.com or similar marketplaces. And don’t make the mistake of staffing up fully, only to discover that your business operates in waves. Have a lean team, and hire extra hands for the heavier times. Remember, try out your team members before making them permanent!
#2 Expenses Before Revenue. Result? Financial pressure and personally funding your business. It’s definitely better to live below your means and grow more slowly. A compelling example of this common mistake is a clothing retailer who recently contacted me, desperate for a quick $200,000 loan. She had never built up the credit rating for her 15-year-old business. She had simply been too busy spotting the latest fashion trends, and in turn, buying inventory on her personal credit cards. Sure, she had racked up zillions of frequent flier miles, but her company wasn’t the least bit creditworthy. Ultimately, when she hit tough economic times, she had to scramble for a personal loan. To top it off, her personal credit score had been damaged significantly over just a few missed payments on her six-digit balance. Ouch.
#3 Skipping the Six-Month Plan. Result? “Strategy of the Second” – and very little accomplished. It’s better to map out the next six months, and if a new project comes up, swap it out with one of equal complexity that is already on your plan. Entrepreneurs can be excessive idea generators. I know I am. With a six-month plan, you will have mapped out the projects for the immediate, foreseeable future and can skillfully avoid manic distractions with poor results. Consider the perils of one company, with the painful “strategy of the second” plan. Each time its mercurial CEO returned from a conference, he’d have a new idea. Were they good ones? Often. But his already stretched staff had no spare energy. Since they had not learned to communicate clearly with one another, they would take on the project, but all sorts of key tasks would, of course, get dropped or delayed, and no one was happy. Ultimately, you need a gatekeeper for the six-month plan if you want your company to run efficiently. This is someone who will ensure the new projects are either scheduled for later or replace existing project(s) of equal size. Someone who will constantly see the big picture, tackle the small details, and facilitate real results every step of the way. By the way, once the CEO in question put a six-month plan in place, his staff was happier, fewer tasks were dropped, and the revenue came rolling in. Desperately want a plan and not sure how to begin? Join this Facebook Group and download the template to get started: http://www.facebook.com/group.php?gid=37400586581
#4 Pointless Partnerships. Result? Time-consuming meetings and planning sessions that do not result in revenue. It is much better to only take on partners for a specific purpose – one that can be monetized within the next 90 days. Partnerships are not about press releases, they are about massive marketing benefits that will lead to revenue or direct revenue generation – right now. I can’t emphasize the now part enough. You can waste a tremendous amount of time on irrelevant partnerships that may have a long-term, glorious future, but for right now, they simply are not worth your time and energy. In difficult times, stay focused. Partner for benefits that you can expect within 90 days or less. Push the longer term deals off your plate; you’ll get to them later, in more stable times.
#5 Chasing All Sales Leads. Result? Wasting time on prospects will not become clients. A CEO complained recently that she had chased a key account for four months. Four months! She finally lost hope that they would ever become a client. When asked if she had a disqualification process, she clearly was confused. Here’s the net-net: you only want to spend time with real prospects. Create a disqualification process so you can quickly remove contacts from your sales pipeline that will most likely never buy your product or service. In tough economic times especially, you must focus your energies on productive revenue streams.
Finally, hang in there and stay hopeful! We have all made mistakes in business. You will definitely get better at rebounding and reducing the amount of time before a lucrative exit. The point is to course-correct constantly. Spot a mistake and take action to correct it. I’d like to hear about mistakes you’re grappling with or biggies I didn’t mention. Feel free to send your toughest questions to www.AskChristineNow.com to be highlighted in our next Q&A teleconference.
About Christine: Christine is CEO of Mighty Ventures (www.MightyVentures.com), a business accelerator which helps businesses to massively increase sales, product offerings, and company value. She has built and sold 5 of her own businesses with an average 700% return on investment, served as a board director or in-the-trenches advisor to 36 startups, and has invested in over 200 startups as a venture capitalist or angel investor. Christine has consulted to the White House (Clinton and Bush), 700 of the Fortune 1000, and hundreds of small businesses. She has repeatedly identified and championed key trends and technologies years before market acceptance. Christine’s mega-best selling book, Rules for Renegades, is available now on www.RulesForRenegades.com or wherever books are sold.
Join Christine on her monthly Q&A calls! Register and ask your question at www.AskChristineNow.com
Download our four free business-boosting podcasts at www.mightyventures.com/gift
Copyright 2007 Mighty Ventures, LLC. All Rights Reserved. Please print and reproduce at will. Content may not be altered in any way. Content may be quoted or referred to with reference to Mighty Ventures, LLC, Christine Comaford-Lynch, Rules for Renegades and all websites listed in above text.