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Common Mistakes Made By Small Business Owners
Change Is Good!
A very trusted business colleague regularly recounts the various small business owners she has known over the years that now are "ex" small business owners. It's always the same sad story about how each owner built a tidy small business and through various bad decisions, they lost their businesses. Wouldn't it be great to avoid the mistakes in your own growing small business?
On a much larger scale, think of businesses like Sears and Kmart. For those who are forty-something and older, Sears and Kmart where major retailers years ago. Many families went to Sears to not only buy hand tools and lawn tractors, but, also get much of their school clothes for the year. Now school clothes come from Old Navy, Aeropostale, American Eagle and Target. Before Best Buy came along, Sears (and to a lesser extent Radio Shack) were the places to buy electronics. Let's also think about car brands that have died along the way including: Plymouth, Oldsmobile, Saab, Yugo, Hummer, Eagle, AMC, Merkur, Mercury and many more. In 1985, at the zenith of their success, Oldsmobile sold just over 1,000,000 cars. If they did that in 2012 that would rank them just behind Ford, Chevy, Toyota and Honda. In 1985 Oldsmobile was on top but by 2004 the last Oldsmobile was sold. What happened in that 19 year period?
The quick answer is...they didn't change with the times. Make sure you change with the times or you might become the next Oldsmobile.
There are two factors why business fail with change:
Extinction - When was the last time you sent a telegram? For some, you may have never sent one. Now we send text messages and emails. Have you ever used a travelers check while on vacation with the family? Today cash and checks are mostly things of days gone by. In the 80s fur coats were a sign of success and glamour for women. In 2013 you'd be hard-pressed to find a good retailer outside of New York or LA that sells fur coats. The idea is that tastes, preferences and technology change the demand for products over time. If you got rich in the 80s selling fur coats maybe it would have made sense to sell high-end women's accessories as well (i.e. gloves, purses, hats, jewelry and so on). In this way, you would still be in business and not looking in from the proverbial outside.
It's Your Own Fault - "It's Your Own Fault" (IYOF) is not a recognized business term used at Harvard Business School. However, it does simplify the message. If your market has not gone extinct (people still buy clothes but not at Sears) and your business sucks year after year, it's your own fault. In the case of Sears it may be too late to turn the tide. Old Navy, Aeropostale, American Eagle, Hollister, A&F and others have built-up such a strong following that Sears may never be able to grow their sales of clothes again in the youth market.
At some point, Sears got lazy and out-of-touch with their customers. Tastes and shopping preferences changed. It became cool to shop in a smaller store at the mall that played hip music with near-anorexic male and female models plastered on the wall. Why would you want to give up that fun to go to Sears to listen to elevator music while your grandma is shopping for support hose?
So take a look at your business and make sure you are changing with the times. Don't be the next Oldsmobile or Sears.
As food for thought, many believe Apple is past its prime and is simply riding the residual high left before Steve Jobs passed away. Even Facebook may be at its peak. Somewhere in the bedrooms and garages of America's youth, lurks the new Steve Jobs or Bill Gates who will bring us the "next big thing".
Have you purchased clothing at Sears in the last twelve months?
Pride Comes Before A Downfall
In the early 1980s, GM made one of the worst cars of all-time named the Cadillac Cimarron. For those not familiar with this car, it was a "Plain Jane" small Chevy sedan which GM added a few Cadillac badges and leather seats. Even for hardcore GM buyers, the Cimarron was the worst moment in GM history. In 2013 we buy a new car and believe it will work in most driving situations without problems. In the owner's manual for the Cimarron, GM actively suggested that owners stop periodically in the summer to let the car cool off. Can you imagine selling a car in 2013 where you tell customers that they have to stop their car during the commute to the office as the cooling system won't keep up?
In the early 1970s GM was approaching 40%-50% of the sales market in the US. The Federal government hinted about imposing anti-monopoly rules against GM. Now GM's market share is 18%. That's a huge failure in any respect. The talking heads in the auto world will blame the fall on union wages and union rules. If that were the major factor, then Volkswagen would be in shambles. Almost all auto factories in Germany are unionized and the Germans take more vacation days than the rest of the world.
The reason for GM's downfall is the arrogance of its executives. While the executives where concerning themselves with internal politics and reserved parking spaces, the consumer shook his head in disgust about the Cimarron. The executives believed they were invincible and GM would continue with its success forever. Sometime around 1990 the Japanese introduced Lexus, Acura and Infiniti to the US. Baby boomers with money who had once aspired to drive a Cadillac or Lincoln went the new Japanese dealership down the street.
In recent years, GM and Ford have made great strides, however, the glory days of 40%+ market share are gone forever. A few years ago Toyota had a big problem with acceleration accidents. Toyota may be becoming the new GM of the 1980s if the bosses in Japan don't watch out.
So in your daily work as a small business owner, don't let the success go to your head. You've built a top-notch business but keep in touch with how you became successful in the first place. There's always another guy who will try to take your spot at the top of the heap. Arrogance is your worst enemy.
Do you remember any of the following companies:
- Wang computers
- Sony (when Sony was the pre-eminent electronics firm)
- Blockbuster Video (they are still here but when have you gone there lately?)
- MCI WorldCom
- Montgomery Ward