7 ways to combat complacency in the workplace and ensure success

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A booming business is something to celebrate. Despite the sad headlines surrounding the pandemic, rising inflation, shortages and pressure on supply chains, many businesses in the US have not only persevered but thrived. In fact, most businesses are growing.

A survey conducted by Guidant on small business trends in 2022 found that 65.3% of businesses are currently profitable, and more than 50% are focused on developing their locations and increasing their staff. The same is true for their mid-sized and larger counterparts – 83% of US mid-sized companies also show optimism in business performance.

Reporting a healthy score isn’t always easy. Ultimately, increased sales and profitable operations are the product of hard work, whether it’s innovative marketing initiatives, sound financial strategies or restructuring — or in some cases, luck. These jobs should be applauded; however, it is important to avoid complacency.

OG Mandino II, bestselling author of The World’s Greatest Trader, once said, “I will not allow yesterday’s success to lull me into today’s complacency, for that is the great foundation of failure.”

Related: Don’t Be Complacent: 13 Proven Ways to Improve Your Business

Investopedia lists complacency as one of the top six reasons businesses fail, and a culture of complacency prevents leadership teams from anticipating downturns and other risks that can hurt the business.

When a business is doing well, it’s easy for owners and leadership teams to become complacent — and the proof is in the statistics. Research by Goldman Sachs shows that 44% of small businesses have less than three months of cash reserves to weather the crisis, and leading financial executives predict a downturn of six months or longer – but current preparations may not be enough to cope and most do not have the right financial strategies to get over it, according to Coupe Global Research.

So when business is booming, what should be done to avoid complacency and ensure the business is on solid footing?

1. Ensure sustainable growth

While growth is fantastic, uncontrolled growth can leave a business on shaky ground. Take LuLaRoe for example. Shrouded in scandal, the demise of multi-market fashion company LuLaRoe (now featured in a docu-series) was a victim of its own success. As the company struggled to keep up with demand, quality declined, shipping problems arose, and a lack of training among the sales force led to declining sales. Too often, a leader’s focus on growth is short-sighted instead of focusing on its long-term maintenance.

Related: 4 Ways to Achieve Sustainable Growth

2. Maintain cash reserves

A business with cash reserves is more likely to survive a downturn and it is recommended that companies have at least three to six months to persevere through downturns. To achieve this, it is necessary to create and stick to a budget, set monthly goals and monitor cash flow while eliminating unnecessary expenses.

3. Reinvest in your business

There’s an old mantra: “You have to spend money to make money.” Reinvesting profits into improvements that can improve the business or create wider awareness provides an opportunity to generate income. Business improvements include staff training and education, investment in improved software or technology, or, for standard locations, remodeling or improved equipment and lighting.

Companies may also choose to reinvest profits to drive growth through a marketing initiative that includes tactics like social media advertising or Google advertising that generate leads and sales. According to CMO research, companies are poised to increase their digital marketing spending in 2022 to stay competitive.

4. Cost and debt control

When business is good, it provides an opportunity to pay off debt, which lowers the debt-to-equity ratio and leads to a more valuable business. It also increases the credit rating of the company. And reducing interest saves money. Although debt is not always bad and can be used as leverage, growing debt and high interest rates are a nuisance.

5. Continue with vertical integration

Through vertical integration, a company can own the supply chain for its products. This allows better control and lower prices which allows the company to increase future profits. Recently, as supply chains are under pressure and in a replacement position, vertical integration is making a comeback among many companies such as General Motors, Tesla and Amazon. Vertical integration has its price though. It can require large capital expenditures to continue and there is often a steep learning curve when scaling a business into a new industry.

6. Reduce risk and have a continuity plan

When business is good, it’s an ideal time to take a step back and do a risk assessment to prevent the unexpected from eating into those hard-earned profits. Few businesses are prepared for crises that can derail a business. According to a study by Mercer, only 51% of businesses have a business continuity plan that provides disaster protocols. It’s also an ideal time to review your insurance policy and identify any gaps or exclusions that could prevent critical claims from being paid out.

Related: Do You Have a Business Continuity Plan?

7. Consider an insurance company

One way to achieve vertical integration while simultaneously managing risk and accumulating cash reserves is to own an insurance company. Captives can write broad loss coverage, including policies with several policy exclusions. Captives can also provide gaps in commercial policies.

In terms of risk, this ensures that the business can be protected against likely threats with more certainty that the claim will be paid. Since the captive is owned by the business or business owner, premiums paid less claims are retained as profit. Thus, a captive allows a company to vertically integrate by owning its own insurance company. By accumulating profits and providing better protection, a captive insurance company allows a business to be ready to survive crises and disasters.

As you experience success, take some time to celebrate. Reward your team, open that bottle of champagne and thank your customers or clients — but don’t fall into complacency. History has shown us that business is cyclical and that it is crucial to take advantage of the good times to prepare for an unexpected downturn.

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