Edge Case Traps
Imagine you’re steering a ship and constantly changing course to avoid small waves, only to get caught in a storm. That’s what happens when you make business decisions based on edge cases—the unusual, the exceptions.
Business is inherently messy, and you rarely have perfect information or visibility. Here are some of the most common edge case traps we see among lower middle market businesses:
1. Underpricing to Keep Customers Happy
Let’s talk about pricing. Maybe you’re keeping your prices low to keep a handful of customers happy. Sounds like good customer service, right? But this can squeeze your margins and stunt your growth. Relationships are vital, but so is your bottom line. Passing on costs is a part of doing business. Competent operators know this, and savvy customers understand
Pro Tip: Be transparent about price increases. If your customers value your service, they’ll stick around
2. Overinvesting in Niche Features
Sinking time and money into a feature because one loyal customer demanded it can derail your focus and resources. If they’re a major chunk of your revenue, it might make sense, but usually, it doesn’t.
Pro Tip: Look at the bigger picture. Invest in features that benefit the majority of your customers, not just the vocal minority. The squeaky wheel shouldn’t get the grease!
3. Setting Policies for Bad Apples
In the daily grind of running a small business, it’s tempting to set blanket policies when one person abuses a perk. But this can frustrate your best employees and hurt morale. It’s a tough call because you want to keep things fair, but setting policies based on a few bad apples can end up holding back your high performers.
Instead of addressing the specific bad behavior, businesses implement restrictive policies that affect everyone.
Pro Tip: Handle problems directly. Address issues on a case-by-case basis and keep your policies
balanced. This way, you don't let a few bad actors spoil it for everyone else.
4. Anchoring to Outlier Outcomes
Sometimes, we strike gold out of sheer luck. But trying to repeat that success without understanding what happened can lead to failure. Positive outlier outcomes, often driven by luck rather than strategy, can mislead businesses.
Pro Tip: Analyze the factors behind successes and failures. Learn from them but avoid basing your entire strategy on outliers.
5. Overreacting to Negative Feedback
Negative feedback, especially from respected sources, can disproportionately impact decision-making. One bad review can overshadow numerous positive ones, leading to misguided decisions.
Psychologically, we tend to feel the impact of negative feedback more intensely than positive feedback. This cognitive bias can skew our perception and decision-making process.
Pro Tip: Develop a systematic approach to feedback. Aggregate reviews/feedback and focus on trends rather than isolated opinions. This helps in making balanced, data-driven decision.
Wrapping It Up
Steering your business effectively means focusing on sustainable practices and making well-informed decisions. Avoid letting edge cases dictate your overall strategy. By being transparent with customers, investing wisely, addressing issues directly, and analyzing feedback systematically, you can maintain steady growth and success
