The 3 Biggest Business Mistakes You Could Make in 2019 and the Next Decade
As a business leader, it’s your job to look at the big picture, anticipate threats, and develop solutions to help your business succeed.
Planning for 2019 will be a pivotal strategic step for the next decade in your business.
In this blog post, we’ll dive into 3 mistakes to avoid in 2019.
- Believing that what got you here will get you there
- Believing you can find and keep the people needed to get you there
- Believing that “winging it” will get you there
Mistake 1
Believing That What Got You Here Will Get You There
The past decade has seen a “rising tide” that has benefited most small and mid-sized private organizations (SMBs) as well as the owners who have seen their investment either in the stock and bond market or valuation of their business increase significantly.
That is not likely to continue for the next decade!
As Warren Buffet has said…
“When the tide goes out, we discover who is wearing bathing suits.”
Mitigate risk by preparing your exit strategy
In 2018, 5 of my 30 CEO/Owner clients consummated a “harvesting event”…either selling their entire business or parts of it to take risk off the table. In the previous 13 years of my Vistage Chair practice in the Brandywine Valley, I had 3 transactions. Why was that?
They were prepared to execute their exit strategy when the market was ready to maximize their valuation! On average, it took about 5 years to prepare and execute these exit strategies as a Vistage Member.
An economic slow down is coming in 2019
Here’s the “macro challenge” that every SMB owner should face.
We’re highly likely to have a slight slow down the 2nd half of 2019 and the 1st half of 2020. Not every business will be impacted in the same manner.
Build a “moat” to protect your business health
The next decade is highly likely to have mediocre growth overall…the tide will be lower. Unless you have a significant “moat around your business” you are at risk to be disrupted by technology-based strategies of competitors.
Health care costs and labor rates are likely to outgrow the rate of your revenue growth. Simply put…most SMBs will have lower profitability as a percentage of their sales in the next decade. With interest rates increasing, we may look back at 2018 as the height of P/E ratios both in the stock and bond market as well company valuations.
And then, there is the likelihood of a “Great Depression” by the end of the next decade!
Don’t just dismiss my thoughts so quickly without reading “Prosperity in the Age of Decline…How to Lead Your Business and Preserve Wealth Through the Coming Business Cycles” by Brian and Alan Beaulieu. In 2029 the last of the Boomer generation…the largest segment of the population…will turn 65 which means there will be fewer “millennials”, etc. to support the “safety net” of Medicare, Medicaid, Social Security, etc. If you believe Washington is going to figure all this out and solve the problem, let me know how that is even possible.
Let’s just say that the Beaulieu brothers forecast is correct…what does this mean to you?
Prepare your business within the next 5 years
It means you have 5 years or so to get your business ready and personal wealth fulfilled so that you can sell the business and step back (notice I did not use the term retire because everyone realizes that is a sure way to a faster death). Because if you want to maximize the valuation of your business when you exit, the buyer has to be able to forecast and believe they have a reasonable period of time to get a decent return on their investment. You need to be out by 2025…and in a market where there are much more sellers like yourself than buyers in the generations behind you!
Mistake 2
Believing You Can Find and Keep the People Needed to Get You There
Every business is struggling to attract, develop and retain top performers and demographically it is not going to get any easier. Maybe “artificial intelligence” will offset that…but I have serious doubts…especially for SMBs.
There is not a line around the block from your front door of MBAs and field workforce (think of construction, manufacturing, etc.) waiting to interview with you.
Quick decisions make it hard for SMBs to find top performers
Usually, SMBs are not very good at selecting top performers. SMBs usually start looking for people when someone leaves and then you have immense pressure to make a quick decision.
Our mantra is “Hire Slow and Fire Fast.”
Training is key in developing new hires
If you are lucky enough to attract a top performer, usually SMBs don’t have the resources (time, money and mentors) to develop them. Not unlike athletic teams and the military, SMBs are on the “front line” every day. They cannot stand down from their clients and prospects to devote the time needed to train someone. Sure, technology helps. But there is nothing like another professional (I consider people in the field in construction, installing and servicing equipment as professionals) mentoring and coaching someone who is passionate about becoming a professional themselves.
As a Naval Academy graduate, I had 4 years of classroom, shipboard, and 60 days of summer training in aircraft, and all other aspects of the Navy before they sent me to the first ship. And then, I spent the first couple of years under the mentorship of outstanding leaders who recognized that one of their key responsibilities was the development of professional naval officers.
Most SMB executives know they should be developing their junior people. Yet, the pressure of the daily challenges makes it very difficult for most of them to do so. Therefore, leaders have a tendency to solve those challenges themselves. An important part of learning is being tested and making mistakes. SMB leaders generally are not focused on that!
Top performers will leave if you don’t invest in their development
If you are lucky enough to attract a top performer but you don’t develop them, what is likely to happen in today’s labor market?
WhenI left the Navy I knocked on 5 doors, got a referral to the kind of company I was looking for, and was hired during the first interview.
What does the millennial generation do today when they are looking for an opportunity elsewhere?
They go online…usually to Indeed or Zip Recruiter, etc. and can get 3 interviews tomorrow. And they are doing that while they are working for you, e.g. on your nickel!
What to do?
Realize that people are the most important asset not on your balance sheet and treat them like that!
Mistake 3
Believing That “Winging It” Will Get You There
Eisenhower said something like:
“Planning is important but the planning process is critical.”
A couple of years ago, I spent a day at the Normandy beaches and saws what the benefits of having a plan are. Yes, Eisenhower realized that the moment D-Day started, what actually would happen would be very different than what the plan called for. Parachutists landing in the wrong area, gliders being destroyed with all the men on them, weather patterns that might undermine the needed 3 days to get sufficient troops ashore, etc.
Because they had a plan for the greatest combined military operation in history…and everyone from Generals to privates knew what their role was…they were able to not only respond to what they faced but do so in an opportunistic way…and they accomplished the mission.
Most SMBs are too busy putting out fires to plan
Unfortunately, most SMB leaders are just “winging it” and putting out fires because they are “on the gun line every day.” And they believe there is no need for a plan because what is really going to happen is completely different. To succeed, you need to break the grip of extreme busyness.
When you land a new client or customer or a new opportunity from a current one, there is a lot of celebration and “high fives.” There is no adrenalin rush in developing a business plan!
Many SMB leaders do not know what it takes to develop and execute a plan:
- Digging into areas of the organization where improvements are needed, e.g. potential improvement points.
- Figuring out what are your strengths, weaknesses, opportunities, and threats with a basic SWOT analysis and trying to figure out what your markets are likely to do
These tasks are not easy. Resuming business-as-usual leads to some mistakes:
- Not taking your leadership offsite for a day or more so they are not interrupted with the daily challenges.
- Not engaging an outside moderator so that the owner can be a participant.
- Not getting clarity around the long-term Vision of the company (3 years is pretty good), defining proactive initiatives with measurable outcomes.
- Not having a Champion who is passionate about solving the challenge and a small resource team working together to develop an Action Plan that identifies what steps are needed, who will be responsible and when that step needs to be delivered.
- Not translating the plan to a one-page document so that the plan can be shared with every employee in the organization…which results in “buy-in” because everyone can be on the same page.
- Not having regular (probably monthly) meetings to review progress and work together to overcome obstacles preventing them reaching their objective.
And yes, not recognizing changes in the marketplace and throwing out parts of the initial plan to shift in a timely manner.
I would always rather have a mediocre plan but outstanding execution than vice versa. But winging it will not get you to where SMB leaders must be by 2025!
Avoid Making Costly Business Mistakes
Proper planning is critical to ensuring your business’ success. Take a morning out of your business to work on your business plan for 2019.
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