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The "look" of your business will make it fail-proof

  • 2001-02-22
  • Paul E. Adams
If you think the pig-sty condition of a business has no bearing on its bottom line, you are mistaken! I believe that a company's appearance predicts its success or failure. If the offices, warehouse or plant are dirty, sloppy and disorganized, I say the business is in trouble.

In my opinion, if it is a physical mess, most likely its financial records will be inaccurate, its quality control procedures faulty, and its management will lack pride.

Just as we judge a person by their appearance, so we do a business. If your business is dirty and disorderly, you are making a strong statement about your leadership. If your employees have a poor impression of your business, so will your customers. If your suppliers think you are about to close your doors, they may get nervous.

I believe poor appearance is an advertisement for incompetent management. Under the "refuse" lies inaccurate and incomplete record-keeping that can cause your business to fail. If you are ignorant of your costs, your expenses, your sales volume or your cash balances, you are putting your company at risk.

A disorganized office is prone to error. Even under ideal conditions, it is easy to pay a bill in error or neglect to invoice a customer.

To prove my point, let me tell you about a 10-year-old, 20 million-dollar company that I watched slide into ruin and the auction block. From the beginning, the owners' management style was erratic, unethical and short-term. Crisis management was their way of life.

The initial success of the company was luck and a growing market, but once the market slowed and the competition increased the company began to falter.

The appearance of the company reflected the owners' management style. It was a mess. Dirt and debris everywhere. The computer center looked more like a storage area for refuse than the nerve center of the company. Filing cabinets and desks were covered with paperwork.

The employee lunchroom stank of garbage. The production floor was littered with half-finished products and raw materials. Not an attractive place inspiring confidence in a management's talents.

As hard times set in, the sales manager became liberal with credit and was quick to reduce prices, believing his tactics necessary to remain competitive, forcing the production manager to substitute cheaper raw materials and component parts. As a result, the quality of the product was compromised.

Unethical survival tactics became common practice. Invoicing mistakes routinely occurred, and customers were billed for products never shipped. If discovered, the owners apologized, blaming it on computer error. As the situation deteriorated more shortcuts were taken, using cheaper and shoddy manufacturing materials. Any semblance of quality assurance disappeared altogether. Attempts by employees to notify the owners of problems, as well as any suggestions, were ignored as if it were none of their business.

A few months before the collapse, management, desperate for cash, increased its borrowing from the bank using daily shipments as collateral; their only concern: money. Nothing else mattered. Some employees suspected that the owners were pledging fake invoices to the bank.

In the final weeks, with the loss of so many customers, the production line dropped from three shifts, to two, to one and then a single half-shift with a handful of employees.

The production floor took on a quiet, eerie feeling of pending disaster. Half the office staff had been laid off, adding to the feeling of doom. The owners spent a major portion of their day in meetings behind closed doors, which fostered rumors. Everyone now feared for his job.

Suppliers and customers soon became aware of the problems. Many suppliers stopped shipping in fear of bankruptcy. Customers became weary of future deliveries and some started looking for new product sources. The mail began to contain certified letters from lawyers and the Internal Revenue Service.

Finally one Tuesday morning, when the employees arrived for work, they were told by security that the company had closed, that they should remove any personal items and immediately leave the premises, and that their final paychecks would be mailed to them. Two months later, everything was auctioned off and the building closed.

This business tragedy need not have happened. The company's outward appearance accurately stated that the company was sick. With care and professionalism the errors could have been prevented. Most were just stupid and careless. It was a business disaster that cost employees their jobs, suppliers millions of dollars and the founders their company. As it slid into ruin they had many opportunities to change the situation. But they didn't. The appearance of their company was a barometer of failure.