Weekly Business Idea

June 15, 2018 – Are You Focused On the Long-Term?

Posted on | June 15, 2018 | No Comments

Main Idea:

How do you evaluate the health of your business?  Is it determined by your cash flow or profitability?  Is it growing or declining?  How do you measure your investments in your business, including new people, services and divisions?

Expansion of the Idea:

I recently finished reading a book called “Go Long, Why Long-Term Thinking is Your Best Short-Term Strategy”.  It is a pretty good read and discusses several large companies’ decisions to jettison parts of their business to remake their future.  One example is CVS deciding to get rid of selling tobacco products in order to focus on being a more dedicated health services company.  They felt that selling tobacco was holding back their main business and they needed to do something about it.  I can’t determine if it was a core value decision or just a strategic decision.  No matter what your perspective, they were giving up $2 billion of revenue.  Yet, one year after they announced that they were getting rid of tobacco, their stock price went to $100 from $73 a year earlier.  Their business model changed and was stronger as a result of their decision.

Most people would look at this and say that is fine for large companies.  It doesn’t apply to small businesses.  Small business owners can’t afford to give up revenue.  They are fighting for their lives and need all of the business that they can get.  The irony is that most small business owners started their business with a long-term view.  They would never have started or acquired a new business if they were thinking short-term.  As they have achieved some level of success they tend to get comfortable and they don’t want to risk money on a long-term prospect.  As a result, they end up with good businesses not great businesses.

Short-term versus long-term thinking shows up in a lot of areas.  Some to be considered are:

  • New product development
  • Training of employees
  • Delegation of duties
  • Development of systems
  • Customer service policies
  • Intentionally cannibalizing your own sales with new developments at a lower price point
  • Taking time for planning or vacations
  • Saying no to the wrong types of customers and businesses
  • Succession planning
  • Physical plant or offices

The above list doesn’t scratch the surface of areas where small business owners can intentionally focus on the long term.  Changes in any of these areas when implemented might have a small short-term cost.  However, making investments in any of these areas has significant short and medium-term benefits when implemented properly.  When we do think about the long term and act on those thoughts, we end up running better businesses now.  Frequently, this turns into more cash flow currently and in the future.

Questions to consider:

  1. Are there areas of your business that need an investment of time or money?
  2. What are your metrics to evaluate your business?
  3. Are they short-term or long-term metrics?
  4. Review the list above.  Pick one item that you think you need to focus on.
  5. Discuss this with your team.

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    These weekly ideas are brought to you by FitzGerald & FitzGerald P.C. For more information about how to use these ideas with your small business contact Tim FitzGerald at trfitz@fitz-net.com.