Don’t Let Short-Term Thinking Undermine Long-Term Success

Your desire to save a few bucks today, may end up costing you a lot more down the road.

6 min read

Opinions expressed by Entrepreneur contributors are their own.

I recently met a business owner who made 100 percent of her decisions based on how it impacts the immediate cash flow of the business. And I mean every decision — from which accountant or lawyer to advise the business, what marketing could drive revenue this minute, all the way down to minute things like figuring out which credit card would yield immediate cash back rewards on expenses.

Some of this is admirable but mostly it is completely short-sighted and hurting her business long term. 

I get it. Most entrepreneurs are cash starved and looking to save every penny they can. But, in this case study post, you are going to learn that cutting pennies today, could be costing you millions of dollars tomorrow. Allow me to explain.

Related: Lean Startups Need Business Plans, Too

Don’t make short term decisions that hurt long term growth.

This entrepreneur only invested in marketing to drive an immediate sale and immediate return on marketing investment. The problem is she is running a B2B business where the highest ROI spend this minute may not be the best tactic for maximizing long term sales, given the long sales cycle lead time of B2B.

For example, if you focus on driving sales, profits and returns today, you would most likely select Google as your primary marketing channel. And that will most likely result in lower ticket transactions, where the client budget is already in place and can be spent today. If she was focused on the long term, perhaps she should have invested in big trade shows in her industry, where very large ticket orders could be secured, albeit on a slower and more patient timeline.

Trying to drive an immediate return is nice, but not if you are sacrificing 10x that amount of sales and profits down the road. It would be better to focus on the biggest long term ROI opportunities, even if it requires some short-term working capital to bridge the gap.

Related: 12 Ways to Actually Get an ROI Using Influencer Marketing

Don’t be cheap on strategic issues — you get what you pay for.

I presented this client with at least 10 accountants and 10 lawyers to consider to help her business. I gave her a complete picture of the strengths and weaknesses of each and recommended which ones I thought best to help with her desired roll up strategy. She focused only on price and picked the cheapest lawyer and accountant on this list. Neither had the M&A experience she was going to need, which came at a slightly higher hourly rate.

That is like cutting off your nose to spite your face! You need advisors who know your business needs or industry. With human talent, you really do get what you pay for, based on their expertise.

Don’t pick the cheapest solution, pick the best solution.

Then I was helping this client with setting up various off-the-shelf technologies, service providers or other point solutions for her business. This included things like her advertising agency, her CRM software, her SEO firm, etc. Again, like with the lawyers and the accountants, she ignored the strengths or weaknesses of those solutions and focused only on price. All she cared about was how the investment would impact today’s cash flow.

Stop the madness! Price is a major consideration but not the only driver. It is much more important you find solutions that offer the most advantages and fewest disadvantages at an acceptable price — which is not necessarily the cheapest price.

Related: How Our Brains Trick Us Into Choosing Instant Gratification Over Long-term Goals

Don’t allow short-term decisions to ruin your customer experience.

One of the short-term decisions she made was in picking her shipping provider to move goods from her warehouse to her customers. She considered at least five solutions, and again picked the cheapest to maximize gross margin. The problem was, she didn’t investigate other important data points, like the percentage of successful online deliveries of each vendor.

It turned out the cheapest shipping vendor also had the highest instances of late deliveries to customers. Guess what happened next? Customers started complaining about missing shipments and they started to lose repeat sales. Again, vendor decisions should be much more than simply a price-based decision, to avoid customer facing situations like the above.

Related: 10 Ways to Trim Shipping Costs

Don’t get lost in the weeds and lose focus on your goal.

This entrepreneur’s obsessive focus on short-term cash flow consumed all of her attention. She would pull out her monthly income statement, run through every expense item, line by line, and figure out how to drive down the cost of each item. She put hours and hours of work into that sole goal. Congrats, you saved a few bucks, but shame on you for not putting those same hours into figuring out how to propel your revenues to new heights. To me, that is more important and required her attention.

You may have save $10K in monthly expenses, but you probably hurt your revenues by $100K per month had you focused your energies there. The point here: you need to prioritize your time and invest it in the best ways possible.

So, the moral of this story here: don’t be cheap! Yes, you want to keep your expenses low, but you don’t want to make cash flow driven decisions that end up slicing your own throat. Each business decision needs to do what is right for the business for the long term, not simply what is best for the bottom line in the immediate term. Make sure your business is properly capitalized to allow it to afford the “right” solution that will give the business the best odds of long-term success.

Remember, it is impossible to maximize long term growth and short term profitability at the same time. You have to pick one or the other.

Source link

more recommended stories

  • The Far-Reaching Impact of Embedding a Sustainable Workplace Culture for World Earth Day — Today!

    Today’s observance is a great opportunity.

  • Keep Your Browsing Data Private With This VPN

    Surfshark VPN is a lightning-fast security.

  • Can You Still Make Money Dropshipping in 2019?

    The short answer is no. April.

  • Get Proficient With Google Analytics and Improve Your Earning Potential

    This two-day course will have recruiters.

  • How This Croatian Basketball Player Made His NBA Dream Come True

    Ivica Zubac, center for the Los.

  • How to Measure Performance of Your Outsourced Developers

    Focus on the outcome, not the.

  • 5 Reasons Why Kindness Has Become the Key to My Happiness, Both in Business and in Life

    One small act of kindness, even.

  • Why Your Stomach May Hold the Key to Your Mental Performance

    Don’t just blame your apathy or.

  • Learn How to Make Smarter Real Estate Investments

    These expert-led classes guide you through.

  • Strong Retail Sales and Corporate Earnings Results Boost Entrepreneur Index™ and Confidence in the Economy

    The Entrepreneur Index™ posted a modest.

  • Mitch McConnell Is Positioning Himself as the Champion of the U.S. Hemp Industry

    The Senate Majority Leader sees hemp.

  • An Argument for Farming Hemp

    U.S. agriculture has seen better days,.

  • Entrepreneur Index™ Down as Medicare-for-All Idea Rattles Healthcare Stocks

    The healthcare industry, normally a defensive.

  • 10 Time Management Tips That Work

    Are you working on clock time.

  • How This Entrepreneur Is Improving Women’s Health

    This non-profit is testing new strategies.

  • Netflix Surges Before Earnings Report and Pushes Entrepreneur Index Higher™

    Meanwhile, the real estate investment trust.

  • Tax Audits Are on the Rise. Here’s Why You Shouldn’t Freak Out.

    Don’t panic, a letter from the.

  • Green Entrepreneur’s New Podcast Will Make You Smarter About the Cannabis Business

    The weekly show features in-depth interviews.

  • Alibaba’s Billionaire Founder Jack Ma Says Companies Forcing Staff to Work Overtime Are ‘Foolish’

    He was responding to a debate.

  • How This Entrepreneur Used CrossFit to Build a Business

    This Entrepreneur won the 2008 CrossFit.

  • How to Negotiate the Price of a Pricey Premium Domain

    Buying a domain at the asking.

  • This Guide Can Help You Shed Your 9-to-5 and Become Your Own Boss

    Shape your own path as an.

  • Do You Have Trouble Sleeping? If So, This Might Help.

    Lack of sleep can affect your.

  • This Leader Says That 4 Words Changed His Life

    April 13, 2019 1 min read.

  • Boost Your Website’s Visibility With This SEO Course

    April 13, 2019 2 min read.

  • Strong Earnings and Big Oil Deal Push Stock Prices Higher

    Oil producer Hess Corp. helps the.

  • How to Monetize Your Podcast

    Gary Coichy, the Founder and CEO.

  • Why Is There No Green in the Garden State?

    Despite wide support by New Jersey.

  • Tesla Shares Down After Gigafactory Expansion Put on Hold

    Plus, Bed Bath & Beyond plummets.

  • Why Can’t Cops Tell Them Apart?

    Both plants are cannabis, but there.

  • Amazon Employees Call for a Company-Wide Climate Change Plan

    This doesn’t guarantee that Bezos and.

  • Bed Bath & Beyond Once Again Drives Entrepreneur Index™ Higher

    The retailer reports earnings after market.