This is an issue no one wants to talk
about leave alone face. It is an issue every entrepreneur will be
faced with often. When is enough, enough, when is it time to throw in
the towel or simply call it quits on a pet project. It does not
matter if you have started a small manufacturing unit or you are the
head Honcho at Kingfisher, this question will come up.
At business school, a class mate came
back after the break and had his recommendation becoming the talk of
the class. To graduate one had to do a thesis on a company and
utilise the learning in class to improve strategically the
performance of the Company under study. He recommended shutting down
the Company. No amount of advice got him to backtrack. Everyone
waited with baited breadth for him to emerge from the viva. Surprise,
he got a D, the highest grade.
After studying the projected future
cash flows based on historic and potential sales, projecting
operating expenses he had concluded that the best option for the
Company was to close down, There was no point in good money chasing
lost money. His logic rather than bankrupt the promoters by
continuing it would be preferable to shut this loss making operation
and use the money saved to get into a new business with a future.
So many products become dated, for e.g.
black and white TV's. Yet, despite the writing on the wall a Company
in Verna continued producing them and did nothing to shift to colour
TV's. Ultimately forced to close. Why did the management wait so
long? One reason is simply “blinkers” are on, they are not
willing to see the writing on the wall. The other reason is that it
seems easier to continue as what next is not discussed.
Can you look at the rear view while
driving your business and check what is coming up from behind. The
way to do this would be reading, tracking the technologies and
planning steps to ensure that the dangers or pitfalls coming up have
contingency plans. In our own business, it could be say tanks with
colours, different shapes or maybe a new technology – blow moulded
water tanks. We can easily say blow moulding is for small bottles and
thus not a threat, but the blow moulding machinery manufacturers are
working over time to make their technology more relevant and larger
products say a water tank is a natural quest.
We cannot stop them, what we can do is
look at ways to reduce our dependance on water tanks, find new uses
where our rotomoulding technology would break new ground. If you are
driving a company you too should think about loo king at the rear
view sooner than later.
We do not have to consider closing down
the whole company, we can even look at product lines or a product.
Keeping a track of the sales year on year, the competition's features
against yours, the margin the product delivers will help you decide.
We used to make an insulated box. The features of our box included no
air pockets in the insulation, was heavier and therefore our box cost
more that the competitors. We killed the product despite its superior
performance. The target customer in those days for us was soft drink
companies who gave each street vendor a box to keep their products
chilled. The box had to be replaced every year irrespective of the
life. So they preferred a cheaper product which they would replace
every year. In hindsight our decision may have been wrong, what
another company saw was a market for the same boxes but in the food
business where quality of the box mattered. There are no easy
answers, we killed the product another Company made a killing by
looking at things differently.
The moral of the story is decide what
is best for your Company at that time and just because someone else
is making money or might make money should not guide your decisions
with reference to a product or Company that is losing. Shut it down
if all else has failed so you may live to fight another day.
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