Once a business is successful, is it also in the clear from elements that can make it flounder? Absolutely not.SIX TRAPS THAT WRECK ESTABLISHED BUSINESSES
Longevity in business can leave owners complacent, unprepared, and misaligned with their personal goals. Here’s how to avoid the key dangers success can bring
There is a plethora of advice available for new business owners. But it’s wrong to assume that the hard work diminishes once entrepreneurs have established their ventures. It’s just that over time, creativity and innovation can subside: When mature companies fail, it is often because they haven’t adapted, particularly during an economic downturn. In thisSmart Answers column, three longtime business consultants lay out six major pitfalls that lie in wait for established businesses—and they illustrate how owners can overcome them.
1. Complacency. Once a company grows to the point where it owns its product or service niche, it’s all-too-easy to stagnate by following conventional wisdom and obsolete business practices. For instance, a 69-year-old professional service provider recently asked when social media would “just go away,” says Mark Stevens, chief executive officer of MSCO, a Rye Brook, N.Y., management-consulting firm and author of Your Company Sucks: It’s Time to Declare War on Yourself (BenBella Books, August 2011). “Worst of all, a company may have a certain way of doing things that it clings to, even when all the evidence says it isn’t working the way it used to,” he says. Even a mature company must maintain a startup mentality, invest in innovation, and raise the bar for its products and services. If that doesn’t happen, Stevens says, it can face a long and painful slide into obscurity.
2. Labor Costs. As a business grows and loyal employees get yearly salary increases, their compensation may grow out of proportion to their market value. “We go into companies and find salaries that boggle the mind,” says Corey Massella, a CPA and partner at Citrin Cooperman, a business advisory firm based in New York. “You can have a long-time secretary who earns as much as the officers of the company.” Evaluate staff salaries annually, making sure they remain competitive, but do not get far out-of-line with the duties and responsibilities required. “It’s a tough thing because you don’t want to hurt loyal people, but small companies cannot maintain these huge salaries, especially during a tough economic time,” Massella says.
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