Has your Reality Check Bounced?

Given all the challenges of starting and running a company, you have to be an optimist to be an entrepreneur. That positive outlook is important. But it can often result in CEOs underestimating the magnitude of a problem when something goes wrong.

When you allow optimism to turn into self-deception, your decision-making process can get distorted. I call it letting your reality check bounce.

Often the first stage in bouncing that check is minimizing the severity of a problem. Sure, sales are down, you tell yourself, but it’s the economy, or a customer’s having a bad quarter, or your sales team just needs some motivation. Things will improve soon, you assure yourself.

Stalled sales are not the only warning signal of serious problems. Slumping gross margins or profits, chronic shortages of cash and declining market share are other red flags.

A further step down the path to serious problems is changing your projections so they look better. Adjust the assumptions in your sales forecast spreadsheet and Excel will generate a chart showing a nice bounceback in sales. Excel won’t know you are fibbing. But the marketplace, and your cash flow, will tell you the unhappy truth.

Unfortunately, that’s not the worst of it. Failing to recognize problems can lead to the even more serious mistake of failing to take timely actions.

Maybe you need to reduce headcount, cut your manufacturing costs, trim less profitable items from your product line, or take other unpalatable steps. Maybe things are so bad that you have to think about restructuring your entire company. There’s a finite window of time to take those steps and see improvement before you company hits a wall. Delay can be fatal.

And when you do act, and discover weakness in one area, don’t stop looking. There rarely is a single root cause for your company’s problem, and almost never a single cure. You need to be prepared to examine every part of your operations. After you think you’ve found “the problem,” keep looking for other issues, because I can guarantee you they exist.

If your reality check has bounced, or you are concerned that it might, and you want hands-on help, not just advice, call us for a free, confidential consultation.

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