A Realistic Look at Your Business – When Determination Alone isn’t the Answer
In a prior article I wrote, called The Power of Persistence, I touched on the high price of emotionally driven investment decisions. When emotions, especially fear, are running high, more damage can be done to a portfolio in a matter of days than one would care to believe. In the Quantitative Analysis of Investor Behavior, a 20-year study conducted by DALBAR, the high price of emotional decisions are clearly outlined.
So, with investing, we know two things to be absolute truths. First, you need to have a proper foundation. As we’ve outlined in previous posts, your investment foundation should consist of a low cost, highly diversified portfolio which is regularly rebalanced. No chasing performance, no active management, no gurus or predictions. Markets are random and no one can predict the future. Instead, we lay a solid foundation and allow the markets, including the volatility, to work on our behalf.
We also know that fees are the number one killer of our investment earnings. Low cost is reached by ruthlessly examining our investments to uncover hidden and unnecessary fees, while also demanding transparency from financial advisors and understanding the fees and / or commissions they are earning. All of this information, and more, is outlined in my latest book 401K Conspiracy. It is an eye-opener for any investor.
So, that’s the plan for investments, — persistence and the ability to stick to your plan without deviating. Once your plan is in place, you’re set. There’s no need to follow the latest news or fill yourself with unnecessary anxiety. Both the ups and downs of the market will work on your behalf. That’s good news.
Persistence and Business . . . A Winning Combination? That Depends.
But what about your business? Does this same non-emotional persistence work there?
If you are a business owner, you probably know that keeping your emotions in check and pressing forward will help you reach certain goals. If you drop your dreams at the first sign of failure or allow yourself to become overwhelmed, you’ll never accomplish anything. Starting and continuing on in a business takes persistence, determination, and the ability to keep your eye on the prize, constantly moving ahead.
But, where do we draw the line? What if things are falling apart? When does determination become delusion? Sometimes, blindly forging ahead is not the best answer.
When Does Determination Become Delusion?
If your current business is going through some rough times, it’s best to take a look at your situation early on. Is this just a lull or are you in real trouble? You can generally assess this pretty quickly if you know what to look for. Here, again, is where emotions need to be removed from the picture. Cut your diagnosis down to simple facts. Here are 3 vital questions to honestly ask yourself. With the answers to these questions in mind, you should be well equipped to decide how to handle your business for 2012.
1. Is there still a market for what I’m doing?
Bottom line, no romancing the topic. This should be either yes or no. Decide whether your business is a trend on its way to the grave or maybe it’s being muscled out by new technology. If either one of these ring true, you’ll need to rethink what you’re offering. Can it be tweaked and revived? Are you offering too much? Did you grow too quickly? Do you have too much overhead? All these are questions that can be answered AFTER you ask yourself whether there is still a market for what you are doing.
“For every failure, there’s an alternative course of action. You just have to find it. When you come to a roadblock, take a detour.”
2. Am I changing and growing with the times?
Change is a big killer of businesses who refuse to grow with the times. I often talk about the importance of learning and growing, and this applies to business as well as to our personal lives. If you are stagnant, your clients will see it, and they’ll look for someone who isn’t .
The key to change involves a proactive attitude and the ability to keep looking ahead. Don’t assume a market that’s being overtaken by technology is going to turn around for you, unless you decide to change and grow with it.
3. Am I spreading myself too thin?
Most business owners and entrepreneurs can recall the Jerry McGuire mission statement scene with amazing clarity. Remember when he realized none of his clients were receiving the kind of service or personal attention they deserved? He went home and wrote out a new plan, one which involved less clients, more personal attention, a return to core values, and a return to what he originally had a passion for.
In business, it is often a knee-jerk reaction to take on as many clients as possible or to offer more services or more products in an attempt to gain a larger client base. This is almost always the wrong formula. It is better to do one thing and one thing well, than to be a jack-of-all-trades and master of none. Have you deviated off the path? Are you constantly drained? Take the time to regroup and to streamline your business. Learn to say no.
Steve Jobs had a wonderful analogy for business success. He attributed much of the success of Apple to what they decided NOT to do. This is a great lesson. Starbucks offers the best cup of coffee. They could have been a full restaurant, but they knew that wasn’t where their success or passion was. Jim Hindman decided to specialize in oil changes when he founded Jiffy Lube. He picked one thing and did it well. He later sold the business to Penzoil for over $40 million dollars. I’d say it was a good plan.
On the other hand, in today’s economy (and as a result of fear), you’ll see more and more businesses offering things that really water down their credibility. There are dentist offices advertising Botox treatments and tanning salons offering teeth whitening treatments. This desperate attempt to keep a dying business alive is painfully evident to potential clients. Now, if you are expanding and growing on one core service or goal, that’s different. Adding a website to an existing business to gain further reach, or deciding to open a second location, those are natural components of growth. Just be careful you are keeping your main focus clear.
Persistence is admirable and often necessary, but ask yourself these questions and decide whether or not 2012 should be marked with some changes as well. Just as we know that rebalancing is necessary whenever your investments drift past a certain allowance, keep that same formula in mind when assessing your business. Capitalize on the strengths and work on the weak areas, either by eliminating them or making necessary changes.
Bryan Binkholder, The Financial Coach, is a catalyst for change in the financial industry. With a true passion to make a difference, Bryan offers practical insights on financial topics, investment strategies, and business success. As a business advisor, motivational speaker and author, Bryan is best known for exposing the inner workings of Wall Street and bringing clarity to common investment misconceptions. Be sure to take advantage of his two most popular resources: 7 Deadly Traps of Investing and The Six Pitfalls of Retirement Planning and look for his latest book, 401(k) Conspiracy, authored with Jim Winkelmann of Blue Ocean Portfolios. If you are a business owner, plan sponsor, or 401(k) plan participant, you’ll want this information.