an hour ago
Articles about finance abound; and most of them contain a wealth of wisdom. Unfortunately, though, few deal honestly with money mistakes businesses make at the enterprise level. And, ironically, that’s exactly where the stakes are highest and the blunders most catastrophic.
To right this wrong, I connected with 10 executives from companies that generate well above eight-to-nine-figures annually and asked them one question: “What’s the single biggest money mistake enterprise-level organizations make?” Here are their answers and exactly how you can avoid those same pitfalls.
1. Paying for talent vs. developing it internally
Russ Jones, CFO at Shopify: “Scaling our employee base without lowering the caliber is easily the biggest challenge we’ve faced. “When you have the capital, it’s tempting to want to just pay for ‘experts’ who are already established in their field. Instead, invest in people who are the right cultural fit and make their technical development part of your overall process.”
Takeaway: Rather than buying talent outright, center your team-building strategy around individuals with the potential for growth, and develop training and mentorship programs to bring them up to speed. Not only does this approach cost less, it builds loyalty and trust within your organization.
2. Substituting office space for collaborative technology
Jeff Rodman, co-founder and chief evangelist at Polycom: “At the enterprise level — and especially for startups just making it big — the ‘big office’ mistake is a killer.
“It’s no longer a given that everyone has to be in the same place at the same time, and that means a lot of expensive real estate is being wasted. This makes the use of professional collaboration technology, whether rented or purchased, less expensive to the company than dedicated floor space in a commercial building.”
Takeaway: Remote working isn’t just preferred by employees, it’s also one of the most cost-effective ways to grow. Even if your ego isn’t tempted by the allure of a “big office,” physical space shouldn’t be the default choice for expanding in the 21st century.
3. Emphasizing customer acquisition vs. customer retention
Neil Patel, NeilPatel.com and four multi-million dollar SaaSs: “What usually gets companies to the enterprise level isn’t what keeps them there. While customer acquisition is the cornerstone of building an empire, customer retention is the key to keeping it.
“Whenever I’m consulting, one of the first steps I take is creating email sequences targeted at customers who have recently left. This isn’t just to earn back their business, it’s to identify why they left in the first place.”
Takeaway: The data on customer retention versus customer acquisition is clear. Not only do existing customers cost less, they’re your company’s most profitable source of ongoing revenue. Increasing customer lifetime value is the low-hanging fruit of sustainable growth . . . and ignoring the people who have already said “yes” is one the most detrimental money mistakes you can make.
4. Spending your way to success
Jennifer Cue, CEO of Jones Soda: “The worst mistake you can make is trying to spend your way to success. “When I came to Jones as CEO, we were a $17 million company spending $11 million before manufacturing costs and losing $7 million annually. Cuts were necessary across the board.
“Of course, the only thing worse than overspending is cutting back and not leading by example. In addition to reducing our spend on things like marketing and advertising, coming back, I chose to take a very low salary, offset by equity. Shortly after that, the entire board aligned themselves and agreed to take a major pay cut, too.
“Overspending sneaks up on the best of us, both professionally and personally. And the more capital you have, the easier it is to fall prey. Facing dire situations demands making cuts, but to truly lead by example, those cuts have to extend across the board.”
Takeaway: Jones…