Nine ways to avoid bad business decisions
A woman I love made a bad business decision several years back. She had a thriving online business practice. When her online popularity increased, a TV network approached her to star in a show. She was head over heels. A year later she was completely broke, utterly depressed and unable to take care of her kids.
Another entrepreneur I read about believed in his business and was determined to make it work at any cost. He had a great idea. Everyone around him told him the same. He didn’t want investors, so he took out a big loan to fund his dream. When his business collapsed, he had to move his family with kids to an unsafe neighborhood to be able to afford rent. He felt miserable and years later he’s still paying back that huge loan.
Both of these people made bad business decisions. I’ve made bad decisions too and perhaps so have you.
The first entrepreneur abandoned the most profitable part of her business when she got her big network gig. She didn’t maintain her email list and her online business, focusing purely on her TV dream. When the TV dream fell through, she had nothing to fall back on.
The second entrepreneur underestimated the importance of execution in growing a business. His idea was so good that he was convinced it will work. But nowadays ideas are just a starting point. It’s execution that determines success.
Both of these entrepreneurs are doing great today. They’ve learned from their experience and they now live fulfilling and successful lives. They didn’t die of heartbreak. In fact, from what I’ve seen, they became stronger and wiser.
But I sincerely wish you’ll never make a decision so bad that you’ll end up in depression or bankruptcy, or whatever feels like a dire outcome to you. They say mistakes are good because we learn from them. But I hope you can get to the same place of fulfillment and success without making any bad business decisions for yourself.
I can’t tell you what to do with your business. Only you can make these calls. But I can tell you some of the common pitfalls that cause big heartbreak in business:
1) Not staying grounded in timeless, basic business principles, particularly marketing ones
Everybody wants their marketing to be “out of the box.” There's nothing wrong with that, but don’t forget about concepts that have been proven again and again - and that work, like:
- Building and keeping a direct marketing customer list
- Creating a strong offer
- Giving people a good call to action
- Creating marketing that breeds repeat buyers, not one time scavengers
- Building a relationship with your list
- Building a brand
2) Not doing the right math before saying “yes”
Your heart is pounding and you feel so excited about this new business opportunity. You feel like it’s the right choice. To validate it, you make some quick assumptions on a napkin. You’re in for the long ride.
Then, 6 months later you’re hit with the harsh reality of (un)foreseen costs, churn and other outcomes that didn’t fit on that small napkin. All because you didn’t patiently consider realistic scenarios while doing your math.
Yes, I believe you should always listen to your heart. Do let your heart guide you. But after your heart has spoken, you'll want to open up excel or take out your calculator, and determine the best and easiest path to make your desire a reality. Your heart will thank you later.
3) Not understanding what you’re selling
Are you selling a book or a better life? Are you selling a shirt or a lifestyle that elevates women and makes them feel strong and beautiful? Are you selling an app or a more productive life? Are you selling a toy or accelerated intelligence?
It matters how you define what you’re selling. Products die quickly, but human desires are eternal and universal. Blockbuster didn’t understand what it was selling, so it made some wrong decisions and lost a lot of money.
4) Working more on improving your marketing than on improving your product
Marketing is a waste of money if the product it sells is not a product people buy again or refer others to buy it. The advice "spend 20% of your time on your product and 80% of your time on promoting it" is utterly wrong and is sure to cause a business to fail in the long term. The companies that last through recessions don't follow this rule. They obsess over their products and always seek to improve them, even when the market has spoken that it wants to buy them as they already are.
5) Not being selective with the advice you choose to follow
I personally believe the best advice comes from the people with the most life experience under their belt. They're simply the wisest.
6) Not listening to your customers
Your customers are always speaking to you, whether you hear them or not. For example, your current customer metrics are often the clearest point of communication you have with them. Yet, many businesses ignore their metrics and instead waste time and money on complicated survey funnels. If you want to know if people love your product, start by looking at your re-purchase and referral metrics, not by adding another survey.
7) Not building multiple streams of revenue in your business
When you make a movie, you can also make money from the merchandise associated with it. When you create a framework of ideas, you can also make money from licensing it to coaches, creating courses, books or experiences around it. When you have a physical store front for your business, you can also host classes. There are always additional ways to use what you already have to build additional revenue streams.
8) Not making your employees feel proud to work for your company
The best work comes from people who would do it even if they didn't get a paycheck. People should feel a sense of purpose and emotional connection to be at their peak.
9) Not continuing to learn
Read as much as you can. Have insightful conversations. Look outside of your industry for ideas. Never stop staying smart and becoming smarter.
Photo credit: Pawel Nolbert