Over the years, I have seen a lot of new business owners take over companies. I always want to root for them because I remember being in that position. I took over Sklar Technology Partners from my dad. But when a new owner starts to make decisions in the business, it’s fairly common their first move: cut costs.
The Key to ‘Great’ Business
It’s amazing how many people use this as their first move. They want to make the business they’re taking over more profitable, so they decide that reducing costs and raising prices is the equation to get them there. How did I never think of this? In all my years of running a business, reading business books, improving company culture, and getting my people more engaged, how did I not realize all I had to do was cut costs and increase my prices?
Sarcasm aside, there is a time and a place to cut costs. For example, when my parents ran Sklar Technology, they’d needed really good health insurance. But when they left, I was the oldest person at the company and everyone was in great health. We were suddenly overpaying for insurance, so I cut that cost.
But from what I’ve seen, when a new owners take over a businesses, they often cut costs without any real reason. They’re making uninformed decisions, which in business is basically the equivalent of putting diesel in a gas car; it’s a bad idea that will always come back to bite them.
Is my financial advisor overcharging me?
Good financial advisors are hard to find. I’m really happy to work with my advisor because he’s a great guy and he does a great job. However, not long ago, I was looking at the numbers and it looked like he was overcharging me. Rather than jump on the phone to chew him out or switch to a cheaper service, I did some research.
I reached out to a friend of mine who works in financial services. I asked him to look at the numbers and see if I was getting a good value. Turns out, my guy wasn’t overcharging me — I just didn’t understand his fees. The fees are pretty confusing, but when my friend talked me through them, it was clear my advisor had put the fees for multiple accounts all in one account. In the end, I didn’t need to change advisors because my guy was doing a lot of other things of value for me. I don’t want to think about the mistake I would have made had I acted on impulse and switched to a different advisor based on price tag alone. I could have been in a lot of trouble.
Play it Smart!
It’s easy to make a bad decision. That’s why business owners should always get as much data as possible before we make big choices. A great way to do that is by talking to experts. When I’m thinking about buying a business, I talk to a guy in town who specializes in selling businesses. He’s able to look at the deal and tell me if there’s anything I should be worried about.
Pro tip: never take your current providers invoice to a new provider and ask them if they can beat it. Not only is it unethical, but you don’t know if they can perform the services based on a price tag.
Another way I make informed decisions is by being part of groups with other professionals. For years, I’ve been a member of The Virginia Council of CEOs. This is an organization of business leaders in Virginia from all different industries. I don’t do business with anyone in that group, so when I talk to them about issues or have conversations, there’s no ulterior motives. We’re genuinely trying to help each other.
Even the most experienced entrepreneur can make a bad business call, but making uninformed decisions is always a rookie mistake. This includes cutting costs on impulse, firing an employee without getting the full story, or putting diesel in a gas car.
Thanks for reading,
PS. Your employees are still a huge vulnerability. Check out my report to discover how hackers really steal your data>