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Cautionary Tales: Examples Of Business Practices That Harm Success

Small-business owners open their companies with big dreams and stars in their eyes. Unfortunately, most brands fail within the first few years, making what was once attractive seem impossible to keep going. One option is to merge a struggling brand with a more successful one.

Oct 13, 202331.1K Shares427.2K ViewsWritten By: Alastair MartinReviewed By: James Smith
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  1. 1. Growing Too Quickly
  2. 2. Not Planning
  3. 3. Entering an Oversaturated Market
  4. 4. Weak Leadership
  5. 5. Poor Customer Relationships
  6. 6. Failing at Money Management
  7. 7. Losing Valuable Employees
  8. Develop Forward Thinking
Cautionary Tales: Examples Of Business Practices That Harm Success

Small-businessowners open their companies with big dreams and stars in their eyes. Unfortunately, most brands fail within the first few years, making what was once attractive seem impossible to keep going. One option is to merge a struggling brand with a more successful one.

What are the things that create problems for companies that you can avoid in the first place? Here are some harmful businesspractices, brands that merged with another for a successful transition and what you should be aware of as you consider selling to a more successful enterprise.

1. Growing Too Quickly

Cash flow is a problem for many fledgling businesses. The U.S. Bureau of Labor Statistics reports around one out of every five small businesses faileventually. While the numbers ebb and flow by year, a pattern emerges that shows many new companies don’t make it for long.

One thing that can damage your cash flow and harm your company is growing more rapidly than you can handle. An example of this is a brand that approaches a big box retailer and lands the unicorn deal to get their product in stores.

Unfortunately, many large retailers expect the brand to send goods and get paid 30 or 60 days later and possibly take returns. Providing so much of an item in advance can break a small business with little flexibility in revenue. A merger helps because it gives the little guy resources from the big company and fixes the cash flow issues.

One brand that grew too quickly at first was KIND. Fortunately, the creator of the delicious snack bar learned his lesson, improved his efforts and wound up buying his brand back a few years later.

2. Not Planning

Failure to plan can hurt your success. Consider every possible natural disaster or worst-case scenario and determine how you’ll handle it. While a merger can often be a good thing for both companies, it also might mean you give up control of your brand.

If you can avoid being forced into a merger, you’ll wind up better off than if you have no other choice. Ideally, a successful merger happens when both parties want it and see all the benefits of coming together under one umbrella.

Even if your goal is to merge with a larger or smaller brand, consider the best way to accomplish that and plan for the transition. Mergers come with their own set of challenges, so you’ll want to ensure you’re ready for whatever comes your way.

One brand that adapted to technological changes too late was Blockbuster. The video rental company was in every big city in the ‘90s. Enter RedBox and Netflix, where users could at first have DVDs mailed to them or pick them up at a machine, and later could stream them directly. It wasn’t long before stores started closing. Had Blockbuster gotten into the mail order or streaming game sooner, it could have had a bigger market share due to its household name.

3. Entering an Oversaturated Market

Merging with a second company reduces competition. Two businesses in the same industry with the same service merge and act as a larger entity. Benefits include better buying poweras you can purchase in bulk.

Rather than fighting to steal customers from a competitor, both present a united front. Most clients will stick with the brand even after the merger. One example might be when two cellphone companies merge. The clients now have access to more perks and a larger network but may be under umbrella pricing for a set term.

T-Mobile and Sprint merged and customers enjoy the perks of both without making a major switch or doing much on their end.

4. Weak Leadership

Your organization’s leadershipmakes a difference in your success. Strong management knows to tap into staff’s critical thinking. They are willing to think outside the box for solutions, such as merging with another brand to stay afloat or bringing on investors to get them through a cash crunch.

Strong leadership sees employees strengths and taps into them, giving credit where it’s due. The attention to detail and work ethic rub off on everyone in the company. Toys R Us once had a thriving business. Most people shopped there for Christmas presents for kids, and even adults bought games from the retail giant. Geoffrey the Giraffe was the mascot and a household name. Unfortunately, leadership failed to pay taxes, adding up to over $15 million. It was the beginning of the end.

Leaders must consider every aspect of running a business. If there is something that isn’t your strength, bring in people who are experts, such as an accountant.

5. Poor Customer Relationships

Retaining customers can improve revenue by 95%or more. Retention must be part of your overall business model. Fortunately, today’s software allows you to focus on customer relationship management (CRM) and reach out on important dates or remind someone it’s time to place an order.

CRM software also tracks what products your audience buys so you can purchase similar ones or keep fast-moving items in stock.

6. Failing at Money Management

Managing moneycan be quite challenging for smaller brands. You may have to wear many hats, including bookkeeping. Doing so can be a challenge if math isn’t your strong suit.

Merging two companies has the benefit of the larger company likely having an accounting team to oversee the ins and outs of moneymanagement. Even if they don’t, you can combine forces and hire the necessary staff to improve cash flow issues.

7. Losing Valuable Employees

What if you could keep employees engaged and working for you instead of jumping ship? You'd save money on recruiting and training costs. The knowledge and experience skilled workers bring would remain within your walls.

A survey by Forbes Advisor shows 32% of older workers want a four-day workweek, and 24% of 42 - to 57-year-olds want the same thing. Nearly 20% of millennials would prefer a shorter week. Survey your staff and find out what perks might help them. If allowing them to work 10-hour days and take Fridays off keeps them with your firm, then it’s worth considering.

Remember that if you merge two companies, each might have its own policies about remote work, working longer days and shorter weeks, and job sharing. Do your best to combine the guidelines into something beneficial for workers.

Develop Forward Thinking

Looking ahead to potential problems avoids many of them. Consider all the positives and negatives of merging two companies. When in doubt about how employees might react to a big change, ask them what they prefer and be as flexible as possible to maintain the top workers from both firms.

Focusing on the things that might harm your business allows you to see more success, and combining two brands may not be necessary. Even if you do choose to merge, it will be on your terms and beneficial to both companies.

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