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Monroe Porter

Don’t do stupid things

By Monroe Porter

I hope this title captured your attention. A lot of research (Google it) supports that intelligent people can do stupid things. Critical thinking requires time, effort and problem-solving skills; being smart is not enough. Sometimes business owners are victims of always being the boss, not gathering input, multi-tasking, being in too great of a hurry, impatience, etc. One of my favorite quotes is, “I know I’m intelligent because I know that I know nothing” from Socrates.

Hopefully as we mature, we get wiser and more reflective, but that is not always the case. Decision making can also be about evaluating risk. My wife is a good, frequent cook but she burned something the other night. I almost made a comment, but wisdom prevailed. This was a wise decision and a risk-free decision.

Frequently we just fail to think things through, and the easy short-term decision can turn into a long-term nightmare. Here are some of the more frequent poor business decisions I have encountered.

1. Failure to stay on top of collections

One report showed that over 25% of construction industry accounts were past due. Another source indicated that 61% of late payments were due to admin, compliance, and other clerical errors. The older a receivable becomes, the less likely you are going to get paid in full.

2. Business owners who tie up all of their net worth in their company

If you plow all your money into your company during your working years, what happens if you can’t sell it when you’re ready to retire? You need to think carefully about where you invest. This lack of diversity can involve owning your building, having too much equipment and building a company that’s too dependent upon you and your spouse.

Building and owning your building can be a good investment, but make sure you build a property that can be sold and fit into another businesses’ needs. For example, building a nice shop at your home can be very cost effective but awfully hard to sell down the road. Diversity is a key to building worth. Don’t put all your eggs in one basket.

3. Letting a difficult employee dominate your culture

Finding good help is difficult, but frequently we hang onto the bad apples way too long. Don’t allow your company to be held hostage by difficult people. You are merely postponing the inevitable while losing good people along the way. Once a difficult employee is terminated you find out how horrible he or she really was.

4. Too socially opinionated

Our country is very divided. Our politics, Covid-19, Black Lives Matter, etc. are explosive. Everybody is right and everyone else is wrong. It is all a little sad. If it ties back into your company, be careful of being too radical on hot issues. I know, I know you have a right to your passion. Possibly you might be better off to keep this stuff out of your business and donate the money to your cause? From a customer perspective it is a no-win situation. I know business owners on both sides of these issues who have tremendously damaged their businesses with such stuff. Business is hard enough without alienating half of your employees and customers.

5. Too much work with one customer

When over 25% or your revenue is with one customer, you have built a risky proposition. I’ve seen this burn businesses time and time again. When you worked for someone else, you had a boss and job. If most of your work now is with just a few large clients, you still have a job but with multiple bosses and not a true business.

6. Failure to put in checks and balances to avoid bookkeeper theft

Having done this for over 40 years, we find about 10% of our contractor clients at some point experienced admin embezzlement. This compares to less than 1% having a major fire or tornado. Yet, most owners are well insured against those type of losses while many owner’s leave themselves at risk of theft by not keeping tabs on people.

7. Failure to do tax planning and manage depreciation

If you wait until your accountant does your taxes to determine your tax liability, you are not doing a good job of planning. Your accountant tends to tell you to always take a 100% depreciation. This is fine if you paid cash for the equipment. But, if you buy on credit and make payments, there may be nothing to write off when the payment comes due. Taking large depreciation deductions does not save you taxes, it merely postpones those taxes.

8. Family employee overload

I understand each and every family has different philosophies when employing family members but here are some things to think about: the pressure of having to feed everyone, the impact of sibling and other family dynamics, the influence an under-performing family employee can have on your culture, the sheer math of the situation – hard to have a 500k business support 5 family members. The road to hell is frequently paved with good intentions.

9. Underestimated overtime and out-of-town burnout

Constantly working out of town can cause family and employee issues. Constant overtime can wear people out. Also, many overextend their lifestyle with the extra pay and trap themselves.

10. Failure to comply with government regulations

The government does not have enough employees and resources to catch all safety, wage and hour violations or failures to pay payroll taxes and income tax issues, etc. Therefore, a government strategy can be to make examples out of businesses who are caught cheating.

Don’t be fooled into thinking an inept government bureaucrat is going to show up when you’re suspected of tax fraud or when a workplace death occurs. An agent with a badge is going to show up.

Remember, if not well thought out, intelligent people can do stupid things. Slow down and take time to focus on the big picture.

Monroe Porter and PROOF Management offer business consulting through industry networking groups and he can be reached at (804) 267-1688.