Have you ever treaded water for lengthy period of time? At first, it’s easy to maintain that movement; but at some point, your muscles start cramping and treading the water becomes more difficult. Everyone knows you can only tread water for so long before you either move or sink. So, when we look at our business, why do we think we can maintain the status quo for a long period of time?
Truth is: your business will either move upwards or downwards, not stay in the same place for a long period of time. This is because there are too many factors, including competitors, customers, vendors, etc., that impact your business movement.
Over the past two years, the oil and gas industry has been struggling with the declining price of oil. A frequently asked question in the energy business community is how long the price is going to remain in the $40 range. At $47 a barrel, that price point is not good for the industry or the economy of cities with a high concentration of energy related businesses. Although we do not have a timeline outlining when the oil price will recover, we do know that something must happen to make it move. By not innovating, changing, or moving, the entire economy is aching. Either companies will adapt and find a way to make it work or their competitors will do so.
Although dealing with a challenging market price can limit your ability to change your status, there are many other ways to counteract those external factors. But first, how do you get stuck?
[box] Lead your company forward and keep your business moving! Download the 7 Habits of Highly Effective CFOs to learn the habits of leading the company to success. [/box]
There are two ways to get stuck in the status quo: no one is pushing to make a change in your business or external factors limit the amount of business movement you can have. It is quite easy to get stuck in your business. You accept that the economy is bad and you cannot change those external forces. Although those external forces, like the oil prices, may limit what you can do to make a change, you will get stuck if you do not do something. Change can be hard if you are not prepared for it.
Some signals that you are becoming complacent and risk not moving in the right direction include:
No one likes to drown, so why do we allow our businesses to do so in “calm” waters? You are treading water in a large body of water. You are comfortable in the water that you are in; the water is the perfect temperature, the sun is not too hot, and you are with friends. But as you tread the water… The sun goes down, waves get bigger, friends go home, and now you are all alone.
Treading water is wanting everything internally to stay the same and still expecting all the external factors to remain the same. After a short time, it becomes impossible to continue to do both. Competition moves forward and customers transfer their business to other companies, leaving you with a company without any innovation, progress, or cash. Getting stuck is not good as it decreases the value of your company, allows for an increase in the amount of competition, and has the potential to destroy the future of the company.
Forbes once said, “your competitor isn’t your real competition: status quo is.” Although the unknown may be scary, it’s important to compare the costs of investing in something to keep you moving forward versus staying complacent and letting your competition pass you by. If you stay in the status quo for long enough, not only will your current competition pass you up and take your customers but more competitors will flood your market.
[box] Competition cannot be accounted for in the financials, but as a financial leader, you can guide your executive team to success. Download the 7 Habits of Highly Effective CFOs to see the bigger picture and steer your company in the right direction. [/box]
Everyone should want to be the latest and greatest. So why would your customer stay with you if you haven’t changed/updated/reacted to new technologies that the customer expects to see?
If you were the customer, would you stay with a company that has stopped investing in their product or service or move to another company that has improved their services to adjust to the technology changes or the moving economy? Most people would choose the latter. My guess is you would too. Don’t lose business over being complacent!
In today’s world, it is no longer safe to just survive. In fact, companies must be working on the offensive side rather than the defensive side to succeed. What does this mean exactly?
Instead of reacting to a declining or expanding economic climate, it’s time to start making educated decisions before it is time to react. For example, our team at The Strategic CFO has consistently looked at what other companies in other industries are doing. If we felt that what they were doing was a good investment and we would be first-to-market in our specific industry, our team would “start moving.”
If times are slow, this is a great opportunity to improve your skills, train your staff, brainstorm, strategize, streamline your processes, and trim off some of the fat of your company. Invest a little in projects, marketing, and training. Although it seems counterintuitive to spend when sales are slow, you will be better equipped to grab a bigger share of the market when the economy picks back up.
If your company is just trying to maintain the status quo and is avoiding risk/innovation/change/etc., then it is lacking a real financial leader. As a financial leader, you must lead your company forward rather than keep your team in a holding pattern. To learn more financial leadership skills like managing your company’s ideas, download the free 7 Habits of Highly Effective CFOs. Find out how you can become a more valuable financial leader.
[box]Strategic CFO Lab Member Extra
Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to manage your company before your financial statements are prepared.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]