Let’s hop right in. In the previous 2 posts we talked about the likely outcome of this depression and how you will have to change your business to stay in business and take advantage of the incredible opportunity that is available because of it.
In my last post we talked about the likely outcome of the economic shutdown and what we can likely expect in the coming years.
Welcome to the business, post-Covid. The world will not be the same for a long time. Things have radically changed and are not going back to normal.
Just the other day one of my clients called me to ask for some help with a marketing problem he was having.
Misapplication of Economic Value Added Concept
Many companies have embraced the notion that the economic-value-added concept is superior to the traditional performance assessment measures based on traditional accounting.
Economic value added, known by the acronym EVA, is a financial measurement metric that considers the relationship between the enterprise’s profitability and the cost of the capital employed to achieve that profitability. The idea behind EVA is that managers should be evaluated in terms of how effectively, productively and profitably they employ capital in the business. To evaluate profit alone without considering the cost of the capital employed to achieve that profit can be very misleading. But if the relevant content and timing factors are not appropriately considered, EVA calculations can be as distorting and misleading as traditional profitability measures.
Ignoring the Stock Price
Companies that ignore their stock price do so at their peril.
While it is crucially important to concentrate on the basic business of the company, if a company is not mindful of what happens to its stock price, it may find it is in for a rude shock. If the stock price falls too low, investors may lose confidence in management, and critical investors may sell out. If the stock price falls too low, a takeover may happen. A company needs to pay attention both to its basic business and it its stock price.
Ignoring the company’s stock price is a mistake.
20 Exploit the Employee
Some companies operate with an exploit the employee approach.
Some companies reason that employees are out to take advantage of them, so the company should get everything it can from the employee. A company may figure that it is paying the employee good money and that therefore nothing more is due or expected. If the employee doesn’t like it, the employee can go somewhere else. After all, there are many other people the company could hire. But will an exploit the employee approach attract and keep the best employees?
Exploiting the employee can be a mistake.
11 Promoting Traffic at the Expense of Profitability
Seeking to establish themselves in a new market, some companies may emphasize customer traffic—to the exclusion of whether they make any money on those so-called customers.
As Peter Drucker has observed, it is a fundamental business truth that the purpose of business is to create and retain a customer. But if you do not make any money on your customers, you do not have a business. Generating traffic without revenue and profitable customer transactions is a sure way to financial ruin. This lesson was relearned by many dot-com technology companies in the 1990s, who promoted traffic to their websites but failed to establish a viable business model. Numerous dot-com companies that failed did not sufficiently understand that, at the end of the day, maximizing hits is much less important than generating revenues in amounts more than the expenses incurred in
achieving those revenues, so that the business can make a profit and sustain itself.
Promoting customer traffic at the expense of good business is a mistake.
1 No Plan
A surprising number of companies operate with no plan.
If you operate with no plan, you are proceeding in reliance on spontaneous, reactive, and even impromptu action—rather than on the basis of deliberate, considered approaches to the business. If what is to be done is not much thought about in advance, the opportunity for reflection, consideration and choosing the best way is quite limited. Without a plan, the benefits of plans—focus on priorities, assignment of responsibilities, accountability for results—cannot be realized. Enterprises with plans achieve greater and more frequent success than those that lack them. For as it has insightfully been said, failing to plan is planning to fail.
Not having a plan is a mistake.