Complacency can ruin your business


December 17, 1990|By Mark Stevens

Ask business owners to name their worst enemies and they'll tell you that taxes, competition and rising costs top the list. Although no one can deny that all three are major hurdles, by laying blame solely on these external forces, entrepreneurs fail to identify and to deal with a dangerous enemy that lurks within. It is the enemy "complacency."

In its most common form, complacency is a state of mind that

views a company's battle for survival, and its struggle to maintain profitability, as a thing of the past. Having fought its way through the start-up years, and having built a successful business, management believes it can turn off the afterburners, scale back and rest on its laurels.

Nothing can be further form the truth. By allowing complacency to take root, entrepreneurs violate a cardinal rule of management:

That no business, regardless of the success it has achieved, can stand in place. It either moves forward or inevitably falls behind.

Consider the all-too-typical case of a talented merchant who built a downtown furniture store into a retail powerhouse generating annual sales of more than $25 million. Blessed with a loyal customer base and steadily rising sales and profits, the owner considered himself set for life. Content to preserve the status quo, he refused to extend beyond his home base by opening additional retail units or by diversifying into related fields.

This classic case of complacency would take a heavy toll when the state highway department exercised its right of eminent domain, razing the merchant's property to make way for a new expressway. Hard-pressed to find an equivalent site downtown, the merchant was forced to lease space in a nearby suburb already saturated with established furniture dealers.

As a result, sales dropped precipitously, cutting deeply into the value of the business just when the owner was thinking of selling out.

Clearly, the entrepreneur could do little to forestall the state highway project. But that's missing the point. By engaging in a carefully controlled program of growth and expansion over the years -- by adding new retail units or diversifying into contract furnishings -- he would have ended his reliance on a single store.

Equally important, he would have multiplied his profit potential by applying his expertise to a wider range of business opportunities. Because he did none of that, complacency left him with a weak and vulnerable company.

How can you guard against the threat of complacency? The best strategy is to take an offensive approach, identifying and implementing ideas that can move the business ahead. Consider the following examples:

* Reach out to new markets. If you are a retail merchant, try selling your goods by mail. With increasing numbers of consumers finding it more convenient to shop at home, launching a mail-order operation can build bridges to one of the fastest-growing segments of the marketplace.

If you prefer to stick closer to the business you know best, explore opportunities to extend your skills to new sites, territories or industry groups.

* Forge a strategic alliance with a supplier, distributor or major customer. If you have always thought you could dominate your market by striking an exclusive relationship with a leading manufacturer, raise the subject with the most likely candidate. Chances are you can achieve powerful synergies by combining your sales, marketing and production capabilities.

By the same token, seek to sell part of the equity in your company to a joint venture partner. If the partner is a larger company blessed with substantial capital, you can gain the necessary resources to expand your business at a time when the credit markets are especially tight.

* Act aggressively to build market share. With most or all of your competitors cutting back on advertising and sales promotions in response to a weak economy, you have an opportunity to step up and fill the void, promoting heavily to win over the customers competitors may be losing. Although it can take courage to step up your promotional activities in this sluggish period, the increased market share you'll gain should pay big dividends once the economy turns around.

* Project where you want your company to be in the year 2000. By developing action plans to get there and by constantly monitoring those plans to make sure you are staying on course, you will assure that your company doesn't pay the price of complacency.

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