End of the life cycle

Most companies we see who have achieved great heights in the corporate world have started small. With either a lucky investor, by their own grit or by one good decision maker, companies thrive. But many die young before they reach the middle scale level. Many survive for a short Product Life Cycle (PLC) for various reasons. The vast majority would enter into a business at its maturity stage, when they see the initiators milking. Unfortunately then the share of market may have become too fragmented for anyone to make a substantial profit for too long. 

So what makes the smallies fall through?

Reputation: For instance Events, Weddings and Training are industries of people. If you and I trust his work, we’d not bat so much of an eyelid to pass on a recommendation. But unlike product driven industries, if one group of people is reduced to disappointment the reverse effect will be time and cost consuming. 

Financial literacy: According to ‘Rich Dad Poor Dad’ by Robert T. Kiyosaki, investments are productive only if they can be milked. The poor dad kept on investing in new businesses and expansions which had a return. In other words, his income was reinvested in profit generating assets instead of consumable assets, he was the first to get money from debtors and last to pay his creditors. Thus his working capital was always liquid. The book goes on to say that an asset is a burden (liability) if it does not generate money. 

In Fawcett’s Loosing my Virginity, Richard Branson was known to constantly borrow and reinvest profits in expansions and revenue generators. For instance, while he was expanding on in his highly themed Virgin Megasotres (an expansion to his mail order record business) he simultaneously invested an arm and a leg on a recording studio where he helped dozens of artists record their most successful numbers. So if you are a small or medium scale business driving a luxury car and living in a brand new condo while struggling to make ends meet, maybe it’s time to restructure your priorities. 

Decisions: Sometimes Smallies are too large to handle their egos. We all are salesmen no matter where we sit. From an IT professional to a weatherman, we got to sell our talent and this shouldn’t be done only when the occasion suits you most, it’s when the occasion is most unsuitable/dirty and ugly will you really achieve the goal.

Bureaucracy: Sure enough bureaucracy can take a company places. To have a rich influential investor, or a good contact in the ‘higher ups’ is always convenient to showcase talent. Most tenders are won as such apart from a few won by pure talent. Unless its benefits are distributed fair and square in all fairness to the client, the company will be remembered for the flaws or will not be forgotten for how it got there. 

So unless you are a smarty smallie selling lime, chillie and coconuts, sweat and grit only will not take you places. Notice the first warnings of the end of the PLC and adopt accordingly. A few micro and macro factors of adopting could be listed as:

Stay away from grey markets: The PC industry we all know of is massively flooded by a large grey market no one can measure nor control. The PC and phone industry is probably the worst to be in or get into today due to its saturation and fragmentation. Even the international representative companies of these industries locally are struggling to push dealers to sell products while restructuring internally. Ironically, we all own a laptop and a phone! 

Move with the trend: If your equipment business failed (irrespective of the reason it failed, the solution is to look for an answer with a strong level of feasibility that would solve the reasons for failure instead of dwelling in it while still remaining stagnant), would you rather go for another equipment investment? Or would you provide services/ repairs relevant for the goods you already sold? Or would you simply liquidate? The sensible looking path will retain your existing customers to whom you can hang on to till market conditions turn tables again. 

Train up: Polishing up for the new Java assignment, take up a Google Ad words test, take up a finance exam if your business is changing and you need to save on overheads, because education will always act as a buffer for your rainy day.  

Location: are you paying for a location you could do without? Or are you located in that corner while your rival scoops up the wallet shares which would have rather been yours? 

Human resources: The make or break factor of any organisation. We have the ‘Flat Spoon’: The over enthusiastic accountant who lacks reporting skills so cant show you a graph of ailing cost to revenue ratios if his life depended on it, the ‘Blocked Rake’: Who cannot close a deal for the company on his own grit so blames the market the client and the full moon! or the ‘Cracked Mirror’: The rude planner/communications executive with broken confidence levels so ends up abusing your customers/suppliers and you end up wondering what went wrong. Hint: Mentoring and inbound/ outbound training helps. 

Bad Debts: The final yet vicious self destruct switch. While it is important to maintain balance between creditors paid after debtors received, it is more important to watch out for your CAPEX and OPEX. If your acquisitions involve sources of credit that cannot be matched by revenue, or if your overheads exceed the income for a period, or if you are paying for a luxury car or a luxury house that generates absolutely no income but is a burden where you cannot put an edge of bread on the table, maybe a change in the direction of the wind is required.

Over the years countless companies have evolved through toughest of times including Trump Plaza Hotel and Casino! Although the same steps may not work for all, shedding extra fat may be essential for that first step of evolution.

The writer is a Director at Forte Corporate Solutions Ltd, and holds a 1st Class degree in Business Management and  MCIM /Chartered Marketer of CIM-UK. Forte Corporate Solutions  Ltd provides BPO and PR solutions.