Do You Really Need That Office (or Overhead)?

 Welcome to the first column of our new series, “Lessons Learned.” Over the past couple of years, I’ve enjoyed writing about some of the critical essentials every business needs in order to be a stronger, more prosperous business. We covered topics on just about every key area of business, including sales, marketing, operations, HR, finance, time management, leadership, personal development, etc.

As I network with many business owners in a variety of business organizations each month, I like to solicit feedback on the column in an effort to keep its content relevant and meaningful. Throughout the course of many discussions over recent months, a number of business owners have expressed interest in hearing about the mistakes other business owners have made; what they’ve learned from the experience and how it’s made them a stronger business.

The harsh reality is that we all make mistakes, especially when it comes to running a business. It’s just part of playing the game. While some mistakes are more costly and painful than others, it’s critical that we all lick our wounds and forge ahead. Most importantly, we must take ownership of our mistakes, assessing what went wrong and then determine what we’ll do to prevent the same mistake in the future.

As such, over the coming months, we want to hear from you. What are the mistakes you’ve made in business and, more importantly, what are the lessons you’ve learned as a result? Some of you may fear the thought of confessing to any mistakes, but the objective of this column is not poke fun, expose, blame, or shed any negative light on you or your business. And don’t worry, your competition has probably made just as many or more mistakes as you have. Our focus is not so much on the mistakes made, but what you’ve learned from it, and how it’s made you a stronger, better owner and improved your business. So, we want to hear from you! If you have any lessons learned that you’d like to share, then please submit them in writing to: ____________.

With that said, we’ll start off with a great lesson learned to share this month. Mark Fraser, owner of inyourspace, inc., a commercial office furnishings and space planning business, willingly volunteered to be our first case study. After a career of six years in the commercial office furnishings industry, Mark left the company he was employed for and launched his own business in 2003. Sales grew steadily each year and as sales grew, space in his home and garage diminished. In September of 2005, in an effort to increase sales, he decided to hire an outside sales representative. Still feeling that some things were lacking in his business (namely, an office where he and his staff could meet with clients and show off the furnishings they sell), Mark began investigating office space. In April of 2006, Mark expanded and moved into his new office. Hiring a new sales representative and leasing office space within such a close proximity of time ultimately proved to be a bigger challenge than he anticipated.

The lease of the space, combined with lease of office furnishings, added a significant overhead burden. Thinking his additional sales staff could offset the increased overhead proved to not go as planned. Mark’s incentive pay for his sales person was a draw against commission plan. However, the sales never came and the draw Mark paid far outweighed the sales that came in. This put a major strain on cash flow and ultimately forced Mark to part ways with the sales rep and again take full sales generation responsibility for inyourspace, inc.

This lesson has been experienced by many a business owner. In the excitement of business growth, sometimes our eyes get bigger than our wallet and we make decisions based more upon emotion than logic. Taking on significantly more overhead without the proven marketing engine to bring in the increased sales needed to cover that overhead can often be disastrous, if not fatal.

Mark’s lesson is a great lesson for every business and has proven to strengthen his firm. While he still has the outside office, he now has additional sales support on a straight commission compensation plan and his business is making good strides toward achieving his goals and objectives.