Have you ever wondered how businesses that seem to be untouchable decline and fall? In today’s podcast, Sean answers that question, along with providing reasons small businesses decline too.
Why is it that companies, whenever they start losing business, just don’t seem to notice it?
When you look at stallworth companies like Sears, JCPenney, Circuit City, and Blockbuster…I can go on and on. It’s like they never quite got the idea that things weren’t going well. I just don’t understand how that could happen so often.
That is why my follow-up podcast to this one is going to be so helpful, because it talks about giving your company an annual physical.
If you do that, you’re not going to be shocked if your business is in decline. You’re going to be able to see it in time to fix it.
How Businesses Decline
So you can start seeing the footprints of how businesses decline, I’ve come up with 12 reasons why businesses decline.
1. They were over-confident
Some of the big companies were especially arrogant. Blockbuster should have noticed the Redbox out in front of all the grocery stores and Netflix mailing DVDs directly to the customer…and then internet video and streaming were taking over everything.
Companies like Sears and Oldsmobile never realized that they could be out of business one day. They were too arrogant.
2. They grow too fast
Some companies got too big in pure size alone just got way with doing too many things for too long. Just because you’re big doesn’t mean you’re profitable.
For example, take IBM and General Electric. They’re all mammoth companies. But look at their stock.
3. Expanded geographically too much
Another thing that I see is they expand geographically with all these locations and it’s hard to manage and staff people do it. This is something that should be obvious and decline happens they start looking at all the stores and realize only a few are making money.
4. Distracted by the new shiny object
They’re always looking for something new. In their desire to innovate they stare at the shiny object and forget what’s really important. It leads to a decline.
5. Forgetting the core business
When you’re staring at the shiny objects you forget your core business. This is what made you the money to start with. Every business has a core business. When you can grow that’s great, but there’s always the engine that financed all the other things. So don’t never forget your core business that helped you make money in the first place so that you could afford the shiny new object, or expand geographically.
6. They wasted money on non-core business
Circuit City getting into CarMax. That was fatal for the core business.
7. They forget the fundamentals of business
There are simple fundamentals. Profit margins, income vs. expenses, burn rate, salary cap, etc. Are you growing your customer base or is it in decline? Is your advertising working? Are you satisfying your customers? Don’t forget the fundamentals.
8. They just want change for change sake
There is no business reason to make a change and they’re just grasping at straws, wasting money while they’re at it.
9. They start exhausting reserves chasing everything
They see the company’s decline and they start exhausting their resources to fix it. And then they run out of money.
10. They have no clear focus
The business is just kind of chasing its tail. There’s no clear goals, objectives, strategy. So a business that doesn’t have a focus is absolutely going to eventually be in decline.
11. They ignore the small threats
It’s the little cracks that sink the boat. You can’t keep allowing the water to seep in. A lot of times you’re looking for the big problem but it’s not a big problem. It’s just a lot of small problems that you failed to address over the years.
12. Poor leadership
Business die with poor leadership. Clear and simple.
If you have good leadership, it’s very sensitive to everything I listed above.
- Great leaders recognizes confidence is great and overconfidence is arrogance. It leads to complacency.
- Great leaders understand growth is fine. Scaling is fine. But it’s strategic growth.
- Great leaders understands to expand geographically you have to have the staffing, management, and leadership for it. You’re got to have the systems for it.
- Greatleaders understand that you can’t get distracted at the shiny object.
- Greatleaders remember the core business.
- Great leadership doesn’t waste money on non-core business.
- Great leaders stay focused on fundamentals like I do every week in business.
- Great leaders don’t just make change. They make strategic change.
- Great leaders don’t exhaust reserves
- Great leaders have clear goals, clear strategies, and clear objectives.
- Great leaders do not ignore small threats.