What Kind of CEO are You?

A conductor may not know how to play every instrument in his orchestra, but he must know the parameters of each instrument and what can be expected of each performer.  So must the CEO of a company with his or her employees.  Lee Iacocca may not know everything there is to know about making cars but not many people know the ins and outs of the automotive industry the way he does.  A CEO must be proficient in many different aspects of business but at some point, most business owners come to the realization that their forte is in one of three categories:  sales, operations or finance.

This doesn’t mean if a CEO is an expert at one, he’s exempt from paying attention to the other areas of his business.  It also doesn’t mean that a CEO can’t become more proficient at a different facet of the business.  It may just mean that everyone has their strong suits that they naturally excel in and other functions might be better left in the hands of another executive.

Even though we all have our strengths and weaknesses, the CEO of a company is responsible for all that goes on within the confines of the company.  No one can be an expert at everything.  Therefore, the most appropriate thing is to do what you do best and have others around you with complimentary talents whose assets counterbalance your deficits. 

Sales CEO

If you are a sales-oriented CEO, then you are probably the extroverted type who could sell sand in a desert.  You have an excellent understanding of your company’s products or services and you know how to articulate to your clients why they need them.  You can probably do this better than anyone else at your company.  You recognize the importance of sales because without sales, your company won’t make money and without money you’re out of business.

Operations CEO

This type of business owner generally possesses a meticulous personality which allows him to identify the inner workings of his company that may need improvement.  Identifying operational deficiencies is not always the easiest thing to do.  Defining protocol and creating systems to make a company operate like a well-oiled machine is extremely difficult and if your brain isn’t wired in such a way as to develop such systems, this may not be your forte.

Finance CEO

If you’re not a numbers guy, then you’re not a finance CEO.  Sometimes, this type of executive is better suited for the CFO position.  Nevertheless, many CEOs who focus on sales or the operations of their business could find themselves somewhat intimidated by the flow of cash running in and out of their business.  It could be quite overwhelming for a person who doesn’t have a mind for finance.  However, a CEO who doesn’t know his company’s numbers is a bad CEO.  This type of business owner tends to rely heavily on his accountant, bookkeeper or controller.  If so, it’s always good to have a check and balance system in place to make sure one of them isn’t deceiving you or making costly mistakes.

If a CEO is more of an operations person, this doesn’t mean that sales and finances should be neglected or mindlessly passed along to someone else to deal with.  Of course, the other areas should be closely monitored by the CEO while he focuses on what he does best.  Every business owner should recognize what their Achilles heel is.  If you’re a visionary who has great ideas but you suck at executing them, then hire someone who can handle that component at your company so that you see your concepts come to fruition. 

Crossing the Rubicon

What do you do when you’ve sunk a lot of time and money into a business that just isn’t yielding the return you had expected or hoped for?  You may feel as if you’ve passed the point of no return because you’ve dumped so much money into it but it’s just not working.  Should you cut your losses or keep pushing along in the hopes that things turn around?  These are hard questions to answer and there’s really no magic formula, as the solution may vary predicated on your specific situation.  Unfortunately, many entrepreneurs and business owners are faced with this situation in their pursuit of success.

You’ve probably read all of the hokey posts and memes that attempt to be inspirational.  They all say that success is about perseverance and not quitting, but could there be instances when quitting really is the best thing to do?  There are times when quitting is most definitely the wise choice.  Particularly if you’re running a business that’s going nowhere.  Maybe your time and energy would be better utilized on another business venture with better opportunities.  Although, sometimes people don’t realize how close they were to succeeding when they decided to call it quits.

Grappling with this type of quagmire is enough to cause apoplexy.  However, along with all of the other difficult decisions that an entrepreneur must make, so must this be considered.  When faced with such a quandary, one must analyze all of the facts in an effort to come upon the most logical solution.  Should you continue along the torturous path of operating a company in turmoil or should you just bail?

Don’t Get Emotional

The best business decisions are based upon wit, not emotions.  Being emotional will only cloud your judgement.  We’re all human so this could be very difficult, depending on your personality.  Consider bringing other people into the equation.  Solicit the advice of friends, family and other business owners who might have a good understanding of what you’re encountering.  Write a pros and cons list so that you can physically see the facts in front of you rather than just picturing them in your mind.

If you are not comfortable with your current situation, don’t worry.  Comfort is not a feeling that business owners always have.  Chaos inspires change far more than complacency.  When everything is running smooth at a company, many business owners take an, “if it’s not broke, don’t fix it” stance.  When there is a severe shortage of cash, the creative juices begin to flow out of necessity.

Determine Your Risk Tolerance

Being an entrepreneur requires an iron stomach.  A certain amount of risk is always involved in starting or operating a business.  It usually involves risking both time and money.  It’s up to you to determine how much of either you are willing to lose.  Drawing a line in the sand may enable you to figure out how long you are willing to be in the game.  No one wants to lose but losing is always a possibility for an entrepreneur, despite the presence of extreme determination.

Risking everything you have is usually not a good business model.  Losing any amount is a hard pill to swallow but it’s always a good idea to determine how much is too much.  Once you’ve figured out what that number is, then you have a better idea as to how much time and money you are willing to invest into your business before pulling the plug.

Devise Alternative Solutions

If you think you want to stick it out, you may need to be have a plan B.  If whatever you’re currently doing is not working, it is probably time to shift gears.  Insanity has been described as doing the same thing over and over again but expecting different results.  Consider a drastic change in how you are conducting business.  Open your mind to the possibilities.  If you really want to hold onto your business, maybe there is something to gain by considering a partner who brings something different to the table.  Maybe a partner has a valuable book of business or client database, more money for working capital, a different set of skills, etc.  Doing so could breathe some life into your operation.

Another option is to consider an investor.  Convincing someone to give you money, particularly for a seemingly failing business, is most definitely challenging.  However, if your business possesses a component that can lead someone to believing that it has value, you might have a chance at some venture capital.  Crazier things have been done before.  Just keep in mind that if you bring someone in who has nothing to offer other than money, you may have just hired yourself a boss.

Other alternatives may include co-branding, diversifying, strategic alliances or teaming up with another company that might have something to gain by having you under their umbrella. 

Consider an Exit Strategy

If your business doesn’t work out, then what?  If you don’t have an answer to that question, you should start thinking about one.  It’s always good to have a backup plan just in case things go wrong.  Try to make this plan before things get tight, when you’re still thinking rationally.  An exit strategy may involve selling your business, closing your business, merging with another company, downsizing, liquidation, hiring someone to assume your role while you figure out what your next move will be, etc.

Business owners tend to become emotionally attached to their companies as if it were their baby.  Walking away from a business could in some way evoke the same feelings one would have about deserting a family member or abandoning a close friend.  It’s rare for a person who worked hard to accomplish something would ever feel good about giving up on their dream.  It’s just important to know that the road to success has many potholes and speed bumps.  What may appear to be a failure could merely be a stepping stone to something greater.

This article is not about quitting or perseverance.  It’s about considering the possibilities when faced with the many challenges that go along with operating a business.

For more information regarding business management consulting services, please contact Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.

Why Many Businesses Fail

Being an entrepreneur or business owner is not an easy road.  It’s a life full with stress, uncertainty and complications.  We all start our businesses in the hopes of someday becoming successful.  Success, of course, being a relative term which might mean something different to everybody.  Notwithstanding semantics and incidentals, most of us hope to make more money as a business owner than we could as an employee.

It’s been said that he who does not learn from history is doomed to repeat it.  The best way to learn about anything it to learn from other people’s mistakes.  If you were to analyze the reasons why businesses have failed in the past, you would come across several commonalities.  Being aware of these elements and monitoring them within your own company can greatly improve your operation or at the very least, let you know if you’re fighting a losing battle.

Inadequate Employees and/or Leadership

The people who work within any organization play an important role as to whether or not it will be successful.  Everyone must pull their own weight and if there is a kink in the chain, it could negatively affect the whole system.  Clients want good service and if they don’t get it, they’ll move on to the next service provider. 

If you have more employees than you need, you will waste money.  If you don’t have enough employees, it will put a strain on the operation and things won’t get done properly.  If your employees are overworked, they will be resentful. If they are under-worked, they will be bored.  If management is inept, this will lead to a breakdown in the entire system.  Your staff is a big part of your business and if they are not working efficiently, business will suffer.

Inadequate Products and/or Services

If your products or services are undesirable, your clients won’t feel they are worthy of their price.  This seems simple but it could get more complicated.  You may think that your products/services are worth something but no one else does.  Another possibility is that your products/services might be desirable but there is an overabundance in your geographic region.  Supply and demand is the cornerstone of any economy.  Maybe your products/services are great but their price is higher than the industry standard or what your clients would consider to be reasonable and customary.

If your products/services aren’t selling, you have to analyze why and determine whether or not there is a solution.  There may not be.  If there isn’t, the only way to salvage your business is to change or add to your current product/service offerings.  Maybe your products/services will be more desirable if they were coupled with other products/services.

Inadequate Systems and/or Policies

If your employees are working efficiently, your managers are leading properly and your company is offering quality products and/or services, it’s possible that there is a gaping hole in the way in which you are conducting business.  In this case, an internal control audit must be conducted and your entire operation must be analyzed from the minute you open to the minute you close.  Write down your company’s entire process on a piece of paper, from the moment you receive your inventory to the moment your clients pay you.

Inefficiencies in the way your company functions could lead to wasted money and unhappy clients.  Either way, your company is losing money rather than progressing.  Go over your procedures with a fine-toothed comb and look for any operational deficiencies that could be detrimental to your bottom line.  They could be right below the surface but if you don’t specifically look for them, they could go unnoticed. These operational deficiencies will eat at your company like a cancer.  A small crack in your foundation could lead to the collapse of your entire infrastructure.  Your business model must be flawless in order for your company to be successful.

There are many reasons why a business could fail but if you look closer at the reasons why you think yours is under performing, it most likely will be derived from one of the situations mentioned above.  There are some measures that business owners can take to mitigate their chances of failure.

Know Your Industry

Before starting a business in a particular industry, it’s important to do your due diligence in terms of understanding the dynamics and inner workings of that industry.  These are things that you may not necessarily see in a book or the internet.  If you haven’t been working in your industry for a substantial amount of time, you have to speak to people who have.  You may think the industry you’re in is a good one but once you dig a little deeper, you may find that there are serious complications that you could be faced with that may not have been initially apparent. Also remember that industries change so what may have worked before may not work now.

Know Your Clientele

Some people run their business based on what they want, not necessarily what their customers want.  It’s natural for all of us to assume that others think the same way we do, but they may not.  The best way to know what your clients want is to simply ask them.  If possible, have conversations with them and get to know their needs better.  Conduct surveys to see if you can harness customer input.  Also question your staff if they have more interaction with your clients than you do.  The data that you collect is invaluable.

Know Your Numbers

It’s easy to get so caught up in the day-to-day operation of your business that you lose track of the flow of money coming in and going out.  Some business owners neglect this function because they’re not particularly good at numbers.  Nevertheless, as a business owner, you must be good at numbers.  You may think that your company is profitable but it really isn’t.  You could be overspending and not even realize it.  Your company can be growing too quickly, not charging enough for products/services, spending too much on expenses, etc.  Your employees could even be stealing from you.  There are a million reasons why keeping track of finances is important to the stability of any company.

For more information about why your company may not be as successful as you hoped it would and what you can do to improve it, please call Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.