[This is part of the series: 7 Tips To Make You Better At Business]
People can be stupid.
The business world is no exception.
One would think that a CEO, manager, or highly paid executive would probably be intelligent, well-read, or even highly educated.
While that is many times true, the leaders of Enron were, however, frauds. The founders of Long-Term Capital Management were grossly naive. And the management of Lehman Brothers was greedily-negligent.
One of my favorite examples of a manager doing it wrong is when a business tries to grow itself out of a problem.
Take a fictional company for example. Expenses are up, revenues are down, and the bottom line is bleeding red.
The CEO finally speaks up and says the answer to the issue is that more revenue is needed.
To get more revenue, the company, he says, needs to add more employees, open another branch office, and greatly increase advertising expenses.
One problem.
All of the proposed changes are additional expenses!
In the face of this issue, I have even heard of companies look to get into a completely new business.
The likes of this idea was comparable to: “Our ten-year-old car dealership has not been profitable in recent years. Why don’t we get into the T-shirt business? I hear their margins have been great.”
To say nothing of the fact that the car business and the T-shirt manufacturing business have little in common.
The answer in times of business, or general economic difficulty, is not to expand and grow. It is to work on efficient ways of increasing revenues while drastically cutting expenses.
Diversification from the beginning can also help.
Here is the common sense tip: Businesses do not grow themselves out of problems.
It can be done – I guess. But it is the exception, not the rule.
On defense, you play defense – not offense.
