ASK COREY
Q: I’m not sure if I should continue going the present course or change it, based on mediocre financial results. How should I make the decision of whether to continue or change direction?
A: With rising interest rates and volatile markets, many real estate agents and other professionals must today make tough decisions on whether to down-size, stay the course or expand to take over increasing market share. The decision to continue on the present course or change direction in a business is complex and multi-faceted. For a mediocre business or a struggling project, it can often be extremely challenging to determine when to call it quits, make a big change or stay the course. Here are some strategies and considerations for a business owner facing such a dilemma:
Self-Assessment
Clear Objectives: Have a clear understanding of your business goals. Are you focused on quick profits, long-term growth, or something else? The path to take may differ based on these objectives.
Time Frame: How long have you been experiencing mediocre financial results? If it’s a short-term phenomenon, the situation might resolve itself. Long-term issues, however, may indicate deeper problems.
Data Analysis
Financial Metrics: Delve into your income statements, balance sheets, and cash flow statements. Identify any trends or anomalies that could be impacting your financial results.
Market Trends: Is your market growing, stagnant, or shrinking? A growing market may offer more opportunities for course correction.
Competitive Analysis: How are similar businesses faring? Are they experiencing the same struggles, or are they thriving? Understanding the competitive landscape can provide insights into whether the issues are specific to your business or are industry-wide.
Customer Feedback: Seek honest feedback from your customers to understand their needs and pain points better. This can inform your decision to pivot or persevere.
Consultation
Advisory Board or Mentors: Discuss your situation with trusted advisors or mentors who understand your industry. They can provide invaluable external perspectives.
Employee Input: Those who are on the front lines are often the first to see problems and may have insightful solutions. Don’t underestimate the value of internal feedback.
Strategy Formulation
SWOT Analysis: Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to help you evaluate your strategic position.
Pivot vs. Persevere: With all the data and feedback, you’re in a better position to decide whether a change is needed. If you decide to pivot, make sure you have the resources (financial, human, etc.) to support the new direction. If you choose to persevere, consider minor adjustments that could lead to improved results.
Risk Assessment
What-If Analysis: Evaluate the best-case, worst-case, and most likely scenarios for both staying the course and changing direction.
Resource Allocation: Ensure you have the resources to support your decision. Changing course often requires an upfront investment in terms of time, money, and effort.
Exit Strategy: Always have an exit strategy in place in case things don’t go as planned. This could be selling the business, winding it down, or another course of action that minimizes losses.
Action Plan
Once you’ve made your decision, create a detailed action plan outlining steps, responsibilities, timelines, and milestones.
Periodic Review
Continuously monitor performance metrics to ensure that the business is moving in the direction you intended. Be prepared to make further adjustments as needed.
For the question of whether to pivot or persevere, the best answer is necessarily subjective, based on one’s personal goals or business objectives. By taking a systematic approach to evaluate your situation, you’ll be better equipped to make a satisfying decision on whether to continue on your present course or make a strategic pivot.
Q: For the time-frame of a situation to resolve itself, what number of months or years would normally be considered short-term or long-term.
A: The definition of “short-term” and “long-term” can vary depending on the industry, market conditions, and the specific business in question. However, here are some general guidelines:
Short-Term
In the context of business performance, “short-term” usually refers to a period of up to one year. During this time frame, businesses may encounter temporary challenges such as seasonal fluctuations, temporary increases in costs (e.g., due to supply chain issues), or short-term declines in customer demand (e.g., due to economic cycles).
Long-Term
“Long-term” generally refers to a period extending beyond one year. If mediocre financial results persist for more than a year, especially if they extend into a two- or three-year period, this could indicate more systemic issues that may require significant changes in strategy, operations, or even the business model itself.
Considerations
Industry Norms: In fast-paced industries like technology, even a few months of mediocre performance could be considered significant. In more stable, traditional industries, businesses may look at multi-year trends to judge performance.
Business Life Cycle: For start-ups or new ventures, “short-term” may be a matter of months, as they may need to show traction quickly to secure additional funding. Established businesses with more resources may have the luxury of a longer time frame for assessment.
External Factors: Sometimes external events can temporarily impact business performance, such as natural disasters, regulatory changes, or economic downturns. It’s crucial to distinguish between impacts from external events and those caused by issues internal to the business.
Investor and Stakeholder Expectations: If the business has external investors, their expectations for performance metrics and time frames for improvement can influence what is considered short-term or long-term.
Financial Resilience: The business’s financial health will determine how long it can sustain mediocre results. Poor cash reserves or high debt levels can make even a short-term dip in performance critical.
The definition of “short-term” and “long-term” should be tailored to the specific circumstances of the business, including industry norms, business life cycle, external influences, and financial condition.
Navigating the precarious waters of a mediocre or struggling business requires a blend of self-awareness, analytical rigor, and adaptive strategy. Corey Chambers’ comprehensive outline encapsulates the necessity of approaching this critical decision from multiple vantage points. Whether it’s understanding your business objectives or diving deep into financial metrics, each step aims to strip away the fog of uncertainty, giving you a more transparent landscape on which to chart your course.
The tools suggested, from SWOT analysis to What-If scenarios, serve not just as diagnostic instruments but as guiding lights that illuminate your path—be it persevering on the current trajectory or pivoting to uncharted territories. Equally important is the counsel of others—advisory boards, mentors, and even your own employees can offer insights that you might have overlooked. Inclusion of such external and internal perspectives adds layers of scrutiny and wisdom to your decision-making process.
Moreover, it’s essential to remember that the decision you make isn’t set in stone. Your periodic review mechanism ensures you remain nimble, ready to make further adjustments as needed. This allows you to respond not just to internal changes within your business, but also to external shifts in the market or competitive landscape.
At the end of the day, the decision to pivot or persevere is not merely an end but a strategic continuum. It’s a dynamic process that is shaped by your goals, informed by data, bolstered by consultation, and refined by ongoing assessment. By embracing a methodical approach as outlined, you’re not just making a choice; you’re making an informed choice. This is where the subjectivity of personal and business objectives meets the objectivity of hard data and external advice, culminating in a decision that is not only sound but also satisfying.
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Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Broker DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Text and photos created or modified by artificial intelligence. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.