Setting a Realistic Business Model Requires Taking a Reality Check

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I'm in the process of reading a very good book that I would recommend to anyone interested in running a profitable business. I assume that would include just about everyone who might have their hands on this magazine at this very moment. "Confronting Reality: Doing What Matters to Get Things Right," by Larry Bossidy and Ram Charan, hits on some very important topics that affect every type of bu...

March 01, 2005

Michael Morris
Michael Morris
Editor in Chief
630/288-8057
michael_morris@reedbusiness.com

I'm in the process of reading a very good book that I would recommend to anyone interested in running a profitable business. I assume that would include just about everyone who might have their hands on this magazine at this very moment.

"Confronting Reality: Doing What Matters to Get Things Right," by Larry Bossidy and Ram Charan, hits on some very important topics that affect every type of business operating in the world today. The key point is this: if you run your business and make key decisions based upon inaccurate data, your results will undoubtedly fall short of expectations, no matter how keen your decision-making and business acumen may be.

The concepts outlined in this thought-provoking follow-up to the New York Times bestseller "Execution" apply to remodeling contractors in much the same way as they do to the corporate empires. The authors suggest six reasons why otherwise capable business people believe in bad information: filtered information, selective hearing, wishful thinking, fear, emotional overinvestment and unrealistic expectations of capital markets.

Any one of these perilous conditions could creep into your business model if you're not aware of their presence and don't know how to keep them from taking hold. Some of you astute entrepreneurs, like the corporate leaders identified in the book, seem to have been born with the innate business savvy required to avoid such pitfalls. The rest will need to work at it. And the authors do an excellent job of laying out a framework within which almost any solid business owner can achieve a reality-based method of operating.

In this issue of Professional Remodeler, we've profiled 21 companies that achieved great results in key areas of their businesses — from strategic planning to performance management to customer service and more. Many set themselves apart in these areas by setting realistic goals and using sound data to guide them through the process.

Take Dakota Builders, for example. The Tucson, Ariz.-based company has been in business for 18 years, but after a lackluster fiscal performance in 2003, they took a painfully sobering look in the mirror and identified a need to improve their tracking of job costs and overhead. By going through this process, Dakota was able to right the ship relatively quickly and bounce back with vigor in 2004.

"The impact has ensured our very survival after a period of poor performance and a false sense of security created by inadequate financial data," says president Greg Miedema. "Identifying our true costs has allowed us to see just what we must have to compete and secure our long-term success."

Dakota's dilemma and subsequent rebound is just one example of a situation that affects every business in the country in some form every day of the year. Sometimes the impact is small because the area of the business affected is small. But when the stakes are high and your bottom line comes under assault because you aren't getting a true picture of your market, your internal procedures, or some other large area of your operation, you might need to take a closer look, as Dakota did, to their credit.

Facing reality isn't an easy thing to do sometimes, but when it comes down to survival of the fittest in today's competitive marketplace, it could make all the difference in the world.

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