How Bad Decisions Result In Business "Debt"

Written by on Sep 22 2014
bad decision

Your business is in debt. Maybe not financial debt, but debt nonetheless. You’re paying the price for ignorant decisions or a lack of decisions in the past.

In software, we have a term called “Technical Debt,” as it relates to things technical. Business debt is an unforeseen cost (time, money, or stress) due to a bad decision.

Just because you don’t build software or have a loan from a bank, doesn’t mean you don’t have debt. Consider these four types of business debt:

Marketing debt brings in the wrong prospective customers, which costs you money in sales time. How much time have you wasted on the phone or in meetings with client leads that are just wrong for your business? Marketing debt is paid in wasted time with the wrong people signing up for your product or inquiring about your services.

Sales debt is paid when projects are under-bid and you spend more time than you planned to finish them. Optionally, the client might start a project with different expectations of what they will receive because you wrote a vague proposal without clear deliverables. Sales debt is created in miscommunication during pre-project sales discussions.

Administrative debt is created when you choose to procrastinate on administration tasks you need to do, and let them build up into messes later. Examples include taking checks to the bank because you want to save 3% processing, snail mailing invoices to clients, and poor (or no) bookkeeping practices.

Organizational debt starts during a project with weak project management, or project management practices that end up costing you time, such as taking too many client meetings, or wasting your day away by not having processes in place. Poor communication among team members also creates organizational debt.

Hopefully, each year Steve and I make less and less decisions that create business debt. Every bad decision or lack of a decision creates debt, but tuning your ability to predict the debt will make you a more efficient business owner.

Here’s How Bad Decisions Can Result In Business “Debt”
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Hi I'm Allan,

I wrote the article you're reading... I'm one of the co-founders of LessEverything. I love my family more than breathing and I love creating videos about our family adventures.

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