Avoid These 6 Recipes for Business Disaster

The article was originally posted at The Wall Street Journal (http://cn.wsj.com/gb/20120809/inv073628_ENversion.shtml)

We are all looking for a recipe for business success that is easy to follow. But what if instead there was a recipe for disaster?

Why would anyone want to know the formula for failure? Because you may be blind to the fact you are already following it, at least in part. And if you know the ingredients to avoid, you’ll save your business before it’s too late.

I thought about all of the entrepreneurs I’ve known, worked with and mentored over the years, and all of the businesses I’ve studied, and I came up with six recipes for disaster. Avoid these and your odds of success will increase dramatically.

1. Get rich quick.
You see a trend, like Web design 10 years ago, and you jump right on the bandwagon because it sure looks like that would be a great way to make money fast. Or, you invest in a program or coach that promises you’ll make millions in just a few short months. Not happening. Get-rich-quick ideas are rarely true, and are never sustainable.

But what about those trends? What about the hot topic of social media, isn’t there money to be made? Absolutely. People will get rich─the people who are passionate about social media. Everyone else will lose.

When you follow your passion with a single-minded focus, money — and lots of it– will be created over time. And when you do start making money, you’ll be ahead of the trend, not following it. That’s how you get rich right.

2. If things are going south, work harder.
You’re ankle deep in the red, so you decide you’d better figure out how to squeeze an extra hour of the day to get more done. When that fails, you start seriously looking into cloning experiments, so you can get twice as much done. Stop right there. Most entrepreneurs fail because they try to work harder, when they should be working smarter.

Rather than ask yourself, how can I find extra hours in my workday, ask yourself how can I spend 10 hours over the next few days developing systems so that this one thing can get done in 10 seconds? Failed entrepreneurs are almost always exhausted entrepreneurs. Successful entrepreneurs have sustainable systems in place that not only enable them to do more in less time, but serve as the infrastructure for scaling their business.

3. Nurture the weak.
You have a few ‘problem’ clients who take up a lot of your time and energy and then reward you with late payments, so you’ve decided to work with them to create a better relationship. Nope. Devoting your energy to fixing weak or challenging relationships deprives your best clients of your attention, which means you’ll eventually end up with unhappy clients all the way around. Let’s face it those crabby clients will never be happy with you. My first business really took off when I let go of my weakest clients and nurtured the strong.

4. Measure revenue from the top line.
You look at your income statement, and if the top line looks good, you think you’re doing all right because you’re focused on the money coming into your company. Wrong. The gross revenue means nothing if, at the end of the day, you have no operating cash. You need to think about the money you’ll have leftover. I know many entrepreneurs who say they have a million-dollar project, but actually end up losing money in the end. And I’ve known entrepreneurs who landed $15,000 projects and took home 10,000.

Think of this analogy: Failed entrepreneurs measure a successful day of fishing by how many fish they catch. Successful entrepreneurs measure a successful day by how many fish they cook.

5. Focus on your wallet.
You’re always thinking about money how much money you could make off of a client, or to how many referrals you can get to well-heeled clients. Bad choice. Every time I see entrepreneurs with a singular focus on how much money they can make, I know I will find ways in which they are weakening their company. Your main focus should be on doing everything you can to help the client. Was Steve Jobs thinking about money when he developed his latest round of products we can’t live without? Not likely. I would argue he was thinking, ‘How could I make a product that will have the most impact on society before I die?’

6. Turn your hobby into a business.
You make a killer from-scratch spaghetti sauce, and your friends think you should bottle it and sell it. Wrong! Launching and growing a business requires passion, something that pulls you out of bed in the morning because you can’t wait to do it. And you’ll do it all day long, and love it, even when you’re so exhausted you can’t even tie your shoes. That’s not a hobby. A hobby is something that releases energy; a passion is something that creates energy.

Sure, there are other ways to fail at business, but this formula is fool-proof. Follow it to the letter, and your business will be toast by Christmas.

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