06/ 16/ 2003
by Jeffrey Moses
During the start-up phase of most small businesses, owners and employees are very conscious of the need to maintain cost controls. As success grows and profitability increases, however, a business will start to have enough cash to make less vital purchases.
While company growth and success are certainly desirable, the success of your small business will depend on your ability to keep frivolous costs in check while continuing to make sales. As a small-business owner, you should watch out for the following tendencies that are common among business owners and their employees when company growth and profitability come into play:
- Some may feel that the company has enough money to purchase any and all equipment or supplies that would make their work
more upscale and high-tech. Many business owners and employees want their company to present a wealthy, financially solid
impression and view costly marketing materials and expensive office furniture as a means to that end.
- Another tendency is to think that because money has been spent on one project or department, a like amount or greater
should be spent on personal projects. When employees begin feeling that the company has an obligation to fund pet projects,
managers need to draw in the reins.
- It may be easy for you and your employees to start thinking that the company’s growth is assured and cash flow will
continue to grow steadily. As a result, you may budget based on best-case cash-flow projections. The truth, however, is that
many small companies experience cash-flow fluctuations even after advanced levels of growth have been assured. (These
fluctuations may be the result of external pressures, such as industry-wide slumps, general economic up and downs, specific
product difficulties, etc.) To assume that growth will be ongoing can result in unrealistically high budgets, which can
hamper the company’s progress during slow periods.
- Some business owners might start thinking that their name is so large that everyone is familiar with it. As a result, they
might think that their marketing strategy does not need specific product information or sales pitches. While many large,
established companies benefit from institutional advertising that focuses primarily on imprinting the company’s image onto
the public’s mind (Coca-Cola, Nike, etc.), a smaller company needs to promote specific products and services to
customers. When a small company attempts to market only its corporate image, potential customers don’t know what the company
is selling, where to purchase it or why the company’s products are unique.
- Finally, employees may enter into the comfort zone, feeling that it is no longer necessary to dedicate themselves to the level of customer involvement that went into starting and growing the company. Your salesmen might begin taking a more laid-back approach after some degree of success has been gained, rather than continuing with the dedicated efforts of their beginning days. The same is true for a company as a whole. It is normal for people to want to think of themselves as having arrived -- and no longer needing to work long hours digging up answers to customer questions, returning phone calls promptly or promoting projects vigorously. But when employees begin avoiding these types of activities, sales quickly suffer.
