Extreme Management

The following is an adaption from the soon-to-be released book, Profits Aren’t Everything, They’re the Only Thing.

Your sales are down. Your operating costs are out of control. Your cash flow has slowed to a trickle. Your bank won’t give you a loan. Of course you blame the economy. Everybody is suffering, so it’s no wonder your business is in trouble, right?

Wrong. Don’t blame the economy. Recession or no recession, if your small business is failing, it’s your fault.

Sure, we all take hits in downturns; but if you’re struggling, if you can’t turn a profit no matter how hard you try, if you’re slicing your salary or facing foreclosure, it’s because you’ve been doing something wrong all along. Take a good, hard look under the hood and you’ll see that most of the problems in your small business are internal. 

Snap out of your coma, end your denial, and look at your financials. Do an honest self-appraisal in the cold light of day. Ask your managers to do the same, anonymously; you may be surprised by what they have to say. Understand where the leaks are in your business, and how, as the boss, it’s your fault. The following rules can help you regain control of your business and help you put profits first.

PROFITS AREN’T EVERYTHING, THEY’RE THE ONLY THING.

Decide now to make the total commitment to run over anyone or anything that gets in the way of your company’s paramount need for profits. Run your business strictly by the numbers.

FORGET SWEAT EQUITY.

Too many business owners believe that when they’re building a business they shouldn’t pay themselves a salary. Venture capitalists call this “sweat equity.” I call it working for nothing and being a fool. The inability to pay yourself a full salary is a red flag that there is something wrong with your business. You’re the one who takes on all the risk, so take better care of yourself.

LOVE YOUR BUSINESS MORE THAN YOUR FAMILY.

Put business first, always! If you’re not fully focused—if family, friends, community, and church fill up your busy weekly schedule—you are probably failing to deliver real profits for your company. Your cell phone is for taking orders from clients, not grocery lists. Weekends are for work. Pray at your desk if you must. Your business is not a part-time job; be there or be broke.

LIVE AND DIE BY A REAL PLAN.

Stop fibbing that you have a real financial and operating plan. If you do, it’s probably gathering dust in a drawer. Blow the dust off that plan, set forth your profit goals, and use ironclad fiscal discipline to enforce them. Budget using a “profits first” plan. When creating a budget, most companies estimate sales first, then analyze each department to figure out the cost of those sales before arriving at the profit. When profit is on the bottom of the income statement, you effectively make it last on your list of priorities.
These companies budget operations based on hopes, then fail to adjust that budget when they fail to meet their projections. Instead, start by setting a clear profit target, stick to a prescribed budget, and teach management how to hold everyone accountable. Cut costs viciously to earn in good times and bad.

BECOME THE WORK GOD. YOU'VE GOT TO BE A TYRANT. 

Owning a small business isn’t a popularity contest. You cannot be effective as the owner of a business unless you are feared—it’s the best motivator. When your employees know you are prepared to enforce, they won’t question your demands, they’ll just shut up and fulfill them. It’s better to be respected than liked. They should do what you say, not what they think. If not, fire ‘em; sooner rather than later.

YOU ARE NOT IN BUSINESS TO PAY YOUR VENDORS.

Managing a company’s outgoing and incoming cash flow is daily, hand-to-hand combat. Every day is a fight to cover costs. So why not use every weapon in your arsenal? Use your vendors as a source of reliable cash—never pay them on time! Stall, in a polite and orderly manner, and consciously expand your payables. Think of every dollar you can defer paying as an interest-free loan.

DON’T TREAT SALES LIKE YOU TREAT YOUR MOTHER-IN-LAW.

Don’t view sales as an unwanted guest. Focusing on sales is the easiest way to grow your business in good times, and sustain profits in bad times. Get out from behind your desk. Breathe down the necks of your sales team. Go out on sales calls. Foster your own relationship with top customers.

WHEN FILING FOR BANKRUPTCY IS YOUR BEST OPTION, DO IT EARLY. 

Be warned—this is a remedy that takes a strong stomach. It’s the toughest decision you’ll ever have to make as a business owner. It’s also a fabulous financial and legal maneuver that will free you of 90% of debt, as well as any other contractual commitments. And if you make this move before your assets and cash flow run out, you will have a much better chance of having a successful Chapter 11 reorganization. The law exists for a good reason: it’s the only legitimate way to defeat a tsunami of debt.