So, What Happened?

In the previous couple of articles, I wrote about my clients from over 100 businesses that I helped get to a place of higher profits and better run businesses.

I told you about how most of the clients shared a somewhat typical background of having started out small in their businesses years ago, maybe running a one-two or three persons operation.

I told you about how they had pushed through challenges of starting a new business up from the grounds and had met with some success, and how such evolution had eventually turned them into a decent sized (small to medium sized) business, with decent revenues and a decent number of employees.

Things were good for a while, but throughout the later years, their results had declined more and more, and as often was the case, declining more and more rapidly.

Upon entering their businesses, their states of affairs were often in terrible disarray, and with results that made you wonder, just as the owners at this point did, whether they still had a business on their hands that could even be salvaged.

I also mentioned that these clients typically were smart people.

They had felt the increasing pain of dwindling cashflow, and previous surplus sifting away, and they had wrought theirs heads with questions on how to turn things around again, and why this was happening to them, and even more often, reminisce about how things used to be better and not understanding why the business wasn’t working out for them anymore.

But despite their searches for answers to the whys or the how tos, they kept coming up emptyhanded, and hadn’t been able to much better their situation or the negative trajectories their businesses were on.

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So, what had happened?

As much as industries are disrupted at what seems a more and more frequent rate, for pretty much all these clients, it wasn’t really that their industries had been disrupted and that that had been the reason for their downfall or deteriorating results.

So, what then?

Competition?

Yes, competition seemed always fierce. One of my pharmacy clients had 17 competitors within a 3 mile radius of her business. Among these competitors were 3 major household brand and blockbuster pharmacies.

My small meat producers in Wisconsin were typically located in areas abundant competitors with similar size and similar descriptive characteristics as themselves. All offering pretty much the same products and services, and besides “fighting for scraps” among themselves also were competing with large supermarket chains.

My CNC machine shops and fabrication clients, in say, Ohio, had what seemed an insurmountable number of similar businesses to compete with.

Same for my oil and heating gas companies in Connecticut, etc.

In every city and town, my clients among HVAC companies, appliance stores, fencing contractors, tile companies etc., etc. all had tremendous amounts of competition.

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In summation, perhaps competition had grown worse, but in reality, there had pretty much always been competition and probably a hefty one at that too. It was not really competition that made the business turn for the worse.

Hefty competition is a fact for a lot of businesses, probably a fact for most businesses. Competition can be a healthy influence and it should possibly rather stimulate your thoughts and ideas on how you can eliminate or reduce your competition by differentiating yourself and your business from the others. Or as the actor Steve Martin said:

Be So Good They Can’t Ignore You.

But that’s a topic for a future discussion.

Back to our current discussion. Here’s what I believe happened to a large degree.

These businesses grew because they had a good solution. A good product(s) or great service(s). Word of mouth often was the modus that got them growing further and as demand and size of business grew, their need for more employees, service vehicles, machines or whatnot also grew.

As they grew, the revenues got larger and along with it also often the profits.

But eventually, the results, predominantly as measured in profits and in gross profit margins, began to decline. This decline continued and even eventually took on more speed.

Upon revision of most of the stories and these business cases, my conclusion is that the business owners’ business acumen quite simply didn’t grow as their businesses grew.

When things were, or perhaps I should say, as long as, things were small enough to easily overlook and handle, then their business results were pretty fair and, in some cases, pretty good.

But now they were overseeing 15-35 employees, handling the upkeep and management of perhaps 20 plus service vehicles, a sizeable machine park, and a large and costly production facility, growing inventory, or production apparatus, or some sort of combination thereof. In some cases, the businesses were bigger, in some smaller. Some businesses were perhaps a little more of the white-collar industries than above indicates, but you can find appropriate substitutes for the machine park etc. with other more suitable items that would be fitting their cases.

The point is that, there troubles and challenges were rather similar and for the most part, I believe and find the reasons for the negative development they had undergone, were much the same.

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What do I mean with lack of growth of their business acumen? Well, that will become more clear as we continue the discussion in the next few articles in which I will point out specific insights on this particular topic.