Truths in running your own business

man drilling with a drill.

Truths in running your own business

Truths in running your own business, running an installation company is generally hard work and there’s not much time for introspection. This following article looks at some inconvenient truths that may contain nuggets to help you run your business.

You can’t be anything you want to be

The American Dream says that anyone can be anything they want to be. While the election of Donald Trump might make us feel this is true, the fact is it isn’t. The first inconvenient truth is you’re not good at everything. Recognising that as soon as possible will help your business greatly.
One of my relatives didn’t believe this. They were smart and did many things outside their expertise, including drafting their own will. The result after they died? Their will was disqualified, then there was a legal case that went all the way to the high court in London. It tore the family apart and cost nearly a hundred thousand pounds in legal fees. All that to save a few hundred pounds in drafting the will. And all caused by over-confidence.
We are at our most successful when we understand our strengths and play to them. Then we need to know our weaknesses and cover them. That’s usually by working with people who have complementary skills.

Ego can be destructive

Often, ego gets in the way of success. I had to tell someone recently that “Non-one likes a smartass”. Arrogance is how ego usually manifests itself. This is off putting for prospects, customers and staff. Making prospects feel small is guaranteed to lose the sale. Explaining to staff how this is your business and their opinion doesn’t count guarantees that they won’t care about the job. Dismissing or ignoring customer’s concerns makes negative reviews and being sued more likely.
Humility, the opposite of arrogance, is a very attractive characteristic. It must be genuine and not over-played. Ego of course often hides deep insecurity. It’s always worth taking a long hard look at ourselves to see where we stand on all this.

You can’t fool people in the long term

In the end, people see what you’re really like.

Many people who run their own businesses don’t have the problem of caring too much about their staff, although some do. But if you don’t care about your people at all, they will realise that over time. Although it might be part of our make-up, we should understand that it is deeply damaging to any business context. Like arrogance, it produces in staff the exact opposite of what you want to see.

Your staff won’t care about you and your business. In the worst case it may translate into not caring about your customers too.

People can be irrational

People aren’t entirely logical. They value some things more than others. They have expectations set by history even when these don’t make any sense. They ignore evidence that says they made a mistake. They feel much more pain from losing something than they feel benefit from gaining the same value. Let’s look at these in turn because understanding these factors in ourselves, customers and staff can be a big help.

Valuing things

When it comes to staff rewards, there can be some strange outcomes. Suppose that you give a member of staff a £30 bonus. That doesn’t seem like much, does it? I doubt the receiving person will be that fussed.

What about if it was a meal out with their wife or partner? That might cost the same but it can have a much higher perceived value. And the partner may now be your biggest fan, helping their other half to overlook your idiosyncrasies. Thinking about non-monetary rewards can be a great help in motivating staff. This principle can also extend to customers. Doing something small for free can have a disproportionately big impact.

I once had a fault with my car. The garage tried to find it and couldn’t. Then I put it in again and they still couldn’t find it. Finally, on the third occasion they managed to track it down. They said that because they hadn’t previously sorted it out, they wouldn’t charge for fixing it. I don’t think it cost them much, but it produced huge loyalty and trust from me. I even stuck with the brand and bought a car from them so that I could get it serviced there.

Expectations

You may remember from many adverts that financial promotions always end up by saying something like: “your investments can go down as well as up and past history is no guarantee of future success”. The law forces financial companies to give the warning because we humans almost entirely ignore this truth.

In particular, past performance almost entirely sets our expectations about the future, and this affects a much wider field than just finance. If we get a 10% rise one year, a 10% the next, then we expect our next rise to be 10%. If we get 5% we are disappointed. That is even if this is generous, way ahead of inflation and on top of an already generous salary.

Often a customer has an amount that a job will cost in their mind. If we charge them much more, they are disappointed and possibly angry. That’s even though their expectations might have been totally unrealistic. It’s the way we are wired.

This has big implications on how we sell to customers but also how we treat staff. We not only have to have an eye on how people react to what we say now. We need an eye on the future too.

Emphasising what great value we give when we meet the customer the first time might help with that initial encounter. But it will also guarantee we won’t get the business if we are not the cheapest quote. And telling people we pay top dollar may help when we recruit them, but they will be disappointed if their review isn’t great. In other words, saying what is easiest now has consequences down the road.

Setting expectations correctly is quite difficult. But it has a big pay-off in avoiding issues.

Loss aversion

This is maybe the weirdest of all the inconvenient truths.

An experiment was conducted where people were asked to choose between two gifts – a mug or a bar of chocolate. 56% of people chose the mug, so it was the most popular. But when mugs and chocolate were handed out randomly and everyone was told they could freely swap, only 10% of the people with chocolate chose mugs. If they were acting rationally, you would have expected 56% of those with chocolate to choose mugs.

This loss aversion – “I already have a bar of chocolate so I don’t want to lose it, even though I would have preferred a mug” – can roll over into our business behaviour. Having a tool stolen can hurt more than an unexpected profit of the same value. Gaining a new and better client doesn’t feel like it offsets the loss of an existing one of the same value.

These are subtle effects but anything that impacts business decisions in an irrational way means we make worse decisions.

Confirmation bias

This is one of the strangest of human traits. Say we commit ourselves to a belief or a course of action. After we do, we tend not to believe any evidence that contradicts what we think. We just want to hear facts which confirm us in what we have already decided.

It’s why people who buy shares on the stock market often cling on to them all the way down the toilet.

So, when we hire someone, most people take a long time to decide they made a mistake. If we settle for a certain type of van, we don’t want to hear that we could have leased it much cheaper elsewhere.

Of course, we’re not always wrong and even when we are, we may not be able to correct the mistake immediately. However, when it is correctable, the quicker we do it the better.

This is a really difficult bias to overcome but being aware of it is the first step.

In conclusion

Inconvenient truths are ones that you don’t want to hear but are important. Facing up to reality is always challenging in any setting. It’s especially important in business where there are nearly always financial consequences when we avoid the truth.

I hope that there’s some food for thought here and I really wish that at least you find it interesting and at best it helps your business.