The hardest decisions are often to decide what NOT to do
March 17, 2011 Leave a comment
In most companies, we usually talk about doing more, going faster, growing. This is all good as long as you are capable of doing this. Sometimes companies need to take a step back and really focus their energy, do less (but better) and take the time to succeed. So what are some of the reasons for stepping back?
Dear old burn rate
It is very hard to build a company without investing ahead of the curve, but there is such thing as investing too much. The lifeblood of a company is the cash you have on hand. Without any cash, nothing can be done. Companies need to have their finger on their pulse at every moment. Do you know how much cash you have? How long can this last (i.e. cash flow forecasting)? How long before you can get back to break/even? Most entrepreneurs that are afraid of losing control (the good old 51%+ ownership) don’t realize that as soon as you are running out of cash, you lost control – not matter how much you own of the company.
This is your third strategy in 8 months
If you are constantly reacting to market and customer demand, it might not be a good thing. Execution of a strategy takes time to deploy and measure. If you keep changing the direction (and focus), it is hard to everyone to make this a success. So if every quarterly offsite is a reason for a new direction – maybe it’s time to step back a little.
Sales funnel of one offs
If you sales team only brings in these one of a kind deals and can never find a way to repeat the same kind of sales, you have a big problem – this won’t ever scale and will make it impossible for you to grow the business. You need to get more leads of the same kind, with the same length of sales cycle.
Making hard decisions
Yes, this is only a few of the reasons that should force you to take a step back. Now it’s time to make the hard decisions: what NOT to do. This is as important as what you want to focus on. Many companies spend way too much time debating about specific projects (“should we be doing it or not”). You need to create an environment where it becomes easier to say NO on things that do not fit your plan – no matter how big an opportunity is. This is also called focus.
Sometimes you need to cut
Saying NO is also saying NO to losing money. There should never be any comfort in burning cash – no matter how big your project is. Ignorance about your real cash situation is borderline suicide. Just hoping that things will get better or that elusive deal (or funding) will come just in time to save the situation is quite a dangerous proposal. If you are running short on cash and don’t have visibility on when the bleeding will stop, you need to cut. It’s hard. It’s painful but someone has to do it – don’t wait for others to make the decision for you.
Be honest
The best trick when it comes to making hard decisions is to be honest. Saying no to a deal that is no longer good for you. Informing employees that you had to make hard decisions about staffing. Shelving a new product idea that was so promising. Honesty is usually the best tool to explain the situation. I remember once that I had to let go of some employees and while this hurt and was difficult; one employee actually thanked me. Not for being cut of course; but because I had been honest with him about the situation and why I had no choice but to let him go. It rarely happens like this but you will be far more respected if you tell the truth than to invent any bogus reason that is only designed to protect your own personal image.
