When you talk to many business people, they are convinced that the problems associated with their industry are unlike those experienced elsewhere. Not only do they believe their industry is unique in the business world, but their own company is one of a kind as well.
By thinking they are facing challenges met by no other business, they will often resist advice or assistance of any kind. After all, as they say, their industry is different from all the rest. Because of this perception, they fail to see universal business failure patterns, and are often too late in reaching a diagnosis. As a result, some very good companies fail, that could have been rescued and returned to health.
Regardless of the perceived one of a kind industry, many serious business failure causes follow similar patterns. Of course, the task at hand is to find and process those patterns in the first place. What we need for finding patterns in business problems is a usable framework. While a checklist might seem a bit simplistic, many of the challenges facing a troubled business have been experienced by many others, who have gone downhill in the past.
Let's examine some similarities.
While the troubled company may at first appear to be in chaos, there are always similarities with other financially distressed organizations. Most of the patterns can be found in the books. Examine the numbers carefully.
Most business people have no idea about the true cost of their goods and services. Very often, what they perceive to be the cost of doing business, for each individual product or service, is too low. Not all costs, hidden or even very obvious, are included in the pricing structure. Losing money, or only making a tiny profit, on every item sold is not a happy thought. Unfortunately, underestimating the true costs of doing business is a widespread pattern in all industries.
Many business people fail to do the right thing. Very often, instead of looking at the right costs, they focus on the wrong ones. Cutting corners, at the expense of current and future customers, is not a wise idea. Marketing and promotional budgets are often the first casualties of budget cuts and austerity measures. Those same reductions also lower the company's revenues by a much larger amount. Failing to promote and market the organization's products and services can lead to disaster.
Some companies stick too long with a failed product or service, or simply one whose time has passed it by. The hot toy of two Christmas shopping seasons ago is not going to be a winner this year either. Instead, encourage creative thinking, and continued research and development of new products and services. Failing companies very often do not listen to their customers, suppliers, and staff people. Thinking you know it all is usually the first step to business bankruptcy.
Seek out the patterns that affect all companies' revenue and expenses. Find patterns of lost opportunities everywhere. You will probably root out the causes of your own less than optimal company performance.
All it takes is a little pattern recognition.
