During my 40 years as a businessman I have made several foolish business mistakes. Many have caused the painful end of an aspiration to build an award-winning business. When it comes to folly, however, I am far from alone.
There are legions of "wannabes" who have killed their dreams as well. They range from small "mom-and-pop" operations to global juggernauts. In my personal world, I can count at least several companies within my investment portfolio whose business founders did the unthinkable as well.
Will I continue to make the same mistakes in the future? The scars on my back are a powerful reminder not to do so. Have I learned from past errors? One would hope so. As a warning to other business builders hoping to celebrate utopia, here are the ten most significant company-killing mistakes leaders must avoid at all cost. Please note that any one of the following is a death knell:
Every day we read of business leaders who are crooks. They have lied, cheated and stolen the assets of shareholders, employees and vendors. They have knowingly engaged in unethical, immoral and criminal behavior in the pursuit of self-aggrandizement, power, and wealth. They have carefully hidden their misdeeds hoping to avoid the bright light of truth.
2. Corrupt culture
Organizations that mistreat employees and abuse customers are ripe for failure. Firms that base their philosophies on "win-lose" thinking, seeking to take advantage of relationships, can neither survive nor prosper. Such an approach generally begins with leadership that is arrogant and greedy. They in turn hire and promote mangers of the same attitude and behavior.
3. Terrible money management
Many firms with excellent potential for growth and fame are brought to their knees by leaders who do not know how to manage cash. The worst case is a company that runs out of money and is unable to make payroll, accounts payable and loan payments. Often, company management has not developed a financial plan that considers three scenarios: conservative, expected, or extraordinary performance, and what to do financially with each situation.
Companies that don't generate sufficient sales with appropriate gross margins are doomed to fail. No firm can grow or prosper without planned revenue attainment. If there are insufficient paying customers, both current and potential to sustain an enterprise in the short and long term, economic viability is questionable.
5. Customers are not relevant
Company leaders who don't listen to and respond to customer needs are facing financial disaster. Sadly, these managers believe their products are compelling; that they are well designed and correctly manufactured. They see no need to talk to potential buyers. They also see no reason to innovate to develop new offerings.
6. Dreadful customer service and support
Managers who do not take care of customers are destined to fail. Leaders who over promise and under deliver will watch a steady stream of their unhappy customers head for the door, while also telling their friends to shop elsewhere.
Companies that engage with one very large customer are at high risk. This assumes that the predominant client represents more than 50 percent of company revenues. I have seen several companies declare bankruptcy when the big buyer selected another vendor or pursued another strategic direction.
8. No vision — no strategy