When problems arise, you can break rules, bring in a partner or just pack it in


October 01, 1990|By Mark Stevens

Sometimes, managing a business is like running on a treadmill. You work hard to grow the business, only to find that for all your effort, you keep winding up at the starting point. For every step forward, there seems to be another step taking you back.

In spite of this dismal performance, most entrepreneurs remain on the treadmill, hoping something will change their fate and get the company moving again. Although optimism has its place in every company, the time comes when you must step off the treadmill and take positive steps to deal with the problems at hand.

With this in mind, a series of corrective actions come into play. Let's review them one at a time:

* Break Your Most Sacred Rules. For years, you've told yourself that the only way to run the business is the way you've run it from Day One. Perhaps it's time to rethink that. Stagnant sales and earnings may be a sure sign that the management formula you've relied on for years doesn't work in today's marketplace.

What to do? Hard as it may be to accept, you may want to break the rules you've established. Assume, for example, that you have always limited your product line to staple goods on the theory that these time-tested items never go out of style. But your theory may be wrong. Changing consumer tastes may mean that some or all of your line is out of date. If sales are sluggish, this may be the right time to add trendy, high-fashion goods to your merchandise mix.

By the same token, if you've always prided yourself on financing your company's growth through internal resources rather than through debt financing, it may be a good idea to re-examine this approach. A healthy infusion of debt capital may be just what your company needs to fund a new product, open a branch store or a launch a drive into export markets. Steps such as that can spur growth.

* Bring In a Partner. Granted you've always run the company yourself, and you've always preferred it that way. But if you're more interested in propelling your business than pampering your ego, consider recruiting an equity partner. Not only for the capital this may generate, but more importantly for the expertise a seasoned individual can bring.

With this in mind, seek an individual with experience in revitalizing troubled companies, or with a proven track record for building growth companies from scratch. If you assume that your company has a solid customer base, these entrepreneurial managers may be interested in applying their skills in return for a share of your company's equity. Trade magazines and business brokers can put you in touch with likely prospects. Take the time to meet with them. Talent like this may have the know-how and the motivation to jump-start sluggish sales.

* Do The Unthinkable: Sell out. All too often, entrepreneurs cling to their companies for emotional reasons. Because they view their business as their "baby," or because "it's been in the family for years," they feel that they cannot sell. But this is hardly reason enough to remain on a treadmill.

No matter how attached you may be to the business, or how long you've owned it, as a savvy business owner you must focus on the all-important yardstick "return on investment." Unless the capital invested in the company produces a competitive yield, it may be prudent to fold the tent, selling the company or its assets and moving on to a more lucrative pursuit.

"If you are uncertain about proceeding in a business, it's a good idea to make a list of the major things you hoped to accomplish when you went into business and the dates you expected to accomplish them by," says Charles Schnaid, a partner with the accounting and consulting firm of Laventhol & Horwath. "Next to these objectives, note what you have actually achieved at this point. If there is a wide disparity between your goals and your accomplishments -- and if the odds of making substantial progress toward achieving your goals in the near future is remote -- the best move may be to pack it in and invest your money elsewhere.

"In most cases, that's better than fighting an uphill battle that's likely to drain your resources, depriving you of the opportunity to make it big in another business."

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