I have made a lot of mistakes in my career but I learned a long time ago that the only thing worse than learning from a mistake is not learning from a mistake. I always feel good anytime I can save someone else from learning something the hard way. Below is a list of some of my biggest mistakes. I hope I can save you from learning them the hard way.
- Not firing fast enough. I have mentioned this in previous posts but it bears repetition. I have never regretted firing someone but I have almost always regretted not firing him or her sooner. No matter how painful it is to fire someone and to find their replacement, once your gut tells you that you have the wrong person in a position and you have nowhere else you can put him, terminate him. However, be sure to do it with dignity and respect.
- Not firing someone for disloyalty or theft. I have caught people being disloyal or stealing and given them a second chance. I have always regretted it. My experience has been that if someone will be disloyal or steal from you once, they will do it again. Get rid of him the first time and save yourself a lot of heartache.
- Hiring a warm body. Sometimes you have a position open and are having a hard time filling it. Don't compromise and hire a warm body. Until you have a candidate who fully meets the position specifications, don't fill the position. You are better off working overtime than cleaning up the messes created by someone who didn't fully meet the job description.
- Skipping steps in the hiring process. Again, when you have a position that needs to be filled ASAP resist the temptation to skip steps in the hiring process. For example, don't fail to do a background check, reference checks, drug screen, etc. Most of the time, when I have skipped a step in the hiring process, I have regretted it.
- Not saving for a rainy day. I once heard a speaker at a convention recommend to business owners that they put 10% of their annual earnings in a separate savings account for rainy day. I'm glad I listened to this advice, because if I hadn't done that I probably would already be a victim of the current recession. It's always good to have a rainy day fund, both personally and professionally.
- Not having succession plans in place. Good sports teams always have a lot of "bench strength." Your business should be no different. You should have a succession plan in place for all key positions and you should have people already on staff to be able to step into key positions as they become open.
- Skimping on training. It has been said that if you think education is expensive, try ignorance. Truer words have never been spoken. Don't skimp on training for your staff or for yourself.
- Being lax on credit. I have bought companies only to find that there were no credit applications on-hand for any customers. Over the years, accounts were opened for customers without requiring the completion of a well-written credit agreement. I have probably seen more companies fail due to excessive bad debts than any other reason. Being strict on credit keeps you from having catastrophic losses and sends the poor credit accounts in your industry to your competition where they ding them instead of you.
- Arguing with a customer. The customer is always right, especially when he's wrong. No one ever won a fight with a customer. I don't care how "wrong" a customer is you will never win the argument. Not only will you lose that customer and make an enemy for life but that customer will tell everyone he knows his side of the story, and believe me it won't be flattering to you.
- Not spelling names correctly. When I was starting out in sales I sent a letter to a prospective large customer without verifying the spelling of his surname. His name was Craft and I spelled it Kraft. I got back a scathing letter informing me that if I couldn't even spell his name correctly how could he trust me to sell him millions of dollars' worth of products a year? The thought of that situation still makes me wince and it happened over thirty years ago.
- Not reporting bad news immediately. Fine wine gets better with time but bad news only gets worse. When something bad happens to you or your company report it to your stakeholders immediately. A few months ago we had a surprisingly bad month and I let our banker know at the end of the last day of the month even though I didn't have to report our results to him for 30 days. I immediately got back a reassuring e-mail stating that while he didn't like to hear our bad news he appreciated my telling him as soon as I knew it. Two months later he renewed our revolving line of credit.
- Being overly optimistic with budgets. I am an optimistic person by nature but I have found that being overly optimistic with budgets isn't smart. Banks set your loan covenants off of your budget in most cases so if you budget too aggressively you will end up with loan covenants that will be hard to meet. And in this type of economy the last thing you want to do is not meet your loan covenants.
- Not cutting back fast enough at the start of a recession. Most businesspeople don't want to start cutting expenses and laying off people at the first sign of a possible recession and I understand that. However, after three successive bad months you are probably looking at a recession and you need to cut deeply and quickly. If we hadn't laid off 35% of our employees in November of 2008 we wouldn't be in business today.
- Not reassigning or terminating people who you have outgrown. Some people who were fine when your business was doing $5 million a year are no longer capable of doing their job when your company is doing $50 million a year. You should try hard to find another position for those types of people in your business, but if you can't, you need to let them go. Yes, it's painful as you generally have gotten to know them and their families but it's more painful to let your business pay the price for retaining a person who has hit their ceiling.
- Buying from too many suppliers. Sometimes it's tempting to buy from every supplier with the latest hot product. However, my father taught me long ago that it's better to mean a lot to a few instead of a little bit to everyone. Plus you don't have to meet with as many suppliers. Try to buy from as few suppliers as possible and you will also have a lot more clout with those suppliers.
- Trying to get the last nickel from every deal. Drive a hard bargain, but don't try to take the last nickel in every deal. Make sure that your supplier ends up with a profitable deal because unless the deal is mutually profitable it won't last for long and you will have to start the negotiating process all over again when the supplier you squeeze too tight stops doing business with you.
I certainly have made more mistakes than the above but these are some of the most painful. What other mistakes have you made? Please share them with me and my readers.
Jim Sobeck is president of New South Construction Supply, West Columbia, S.C. This article originally was posted on Sobeck's Biz 101 blog. Copyright 2011 by Jim Sobeck. All rights reserved. This information may be reproduced as long as full credit is given to the author.