How to Shift Your Mindset from Short-Term Selling to Long-Term Success
Many entrepreneurs fall into the trap of seeing and treating everyone they meet as a potential buyer. This is especially true of entrepreneurs heading a fledgling company or startup.
Always in pitch mode, these entrepreneurs see everyone as a potential customer or investor.
While this tenacious, dogged determination to make a sale is likely to reflect well on your monthly revenue, it might cost you something bigger in the long run.
It is like grabbing a handful of pretzels and walking away when you could actually have had the whole bag if you were only more patient and strategic in your approach.
From the outside, business looks like a basic profit-and-loss operation.
However, if you look closer, you will realize that though profits are the prize, they are not the foundation of a successful business.
If you look closely, you will realize that business is social, and relationships are the cornerstone of business success.
Good times come and go, but the meaningful relationships you have cultivated with clients, suppliers, investors, and other stakeholders will stay strong and help you ride through the bad times.
Look closely into the history of any business that has existed for a long time and you will find that all went through bad times, during which they might not have been profitable, but they somehow managed to survive.
Their customers were loyal. Their shareholders remained loyal and didn’t sell their stock.
Their best employees didn’t quit. Suppliers, creditors, and all other stakeholders remained loyal, helping the business get through the rough patch.
Overall, while focusing on sales and revenue is important, building meaningful relationships with stakeholders and your network as an entrepreneur is equally important.
If you focus solely on short-term selling at the expense of cultivating solid relationships with clients and stakeholders, you leave your business vulnerable.
Any small setback could bring the company to its knees.
THE PRESENT VS THE FUTURE: PLAY THE LONG GAME
In business, you have to strike a good balance between minding the present and preparing for the future. If you pay too much attention to the present, you risk having a precarious future.
Conversely, if you pay too much attention to the future while forgetting the present, you risk not having any future to speak of as your business is likely to fail due to present unprofitability.
In other words, you must do what you have to do to keep the business afloat, and at the same time, you should not get so caught up in making the business profitable at present that you lose sight of the big picture.
Short-term selling might help the business survive today, but it won’t guarantee a secure future.
The best-case future scenario for any business is to have a set of tenaciously loyal customers who act as brand ambassadors, bringing in more customers through word-of-mouth.
In that best-case future scenario, you don’t have to pitch and market yourself as aggressively and expensively as you do today.
You accomplish this by cultivating relationships with your customers.
Show them they can trust you, that you are reliable. It takes time, but once you have their trust, they will keep coming back to your business and bring you new customers.
If one of these satisfied, loyal customers happens to be an influential person, you have it made.
They will sing your praises to their followers, bringing you an influx of many new customers who didn’t cost you anything to acquire. In other words, free advertising.
THE MARSHMALLOW EXPERIMENT: LEARN TO DELAY GRATIFICATION
Ever heard of Stanford’s Marshmallow Experiment?
This was a series of studies done by Stanford professor, the psychologist Walter Mischel, in the late 1960s and early 1970s.
The experiment involved giving children the choice between getting a small reward (a marshmallow, cookie, or a pretzel) instantly or double the reward if they waited a little bit longer.
The tester would leave the room, giving the children time to consider the options.
As you might expect, some of the children ate their marshmallow as soon as the researcher walked out of the room.
Some fidgeted in their chairs, trying to restrain their desire for the marshmallow, but eventually gave in to temptation.
Some of the children were, however, able to wait and receive two marshmallows once the researcher came back about 15 minutes later.
Here is the interesting part of the marshmallow experiment.
Follow-up studies years later established that children who preferred to wait longer were more likely to do well in life.
Those who waited were more likely to have higher SAT scores, better social skills, lower likelihood of obesity, lower likelihood of abusing drugs, better response to stress, and so on.
While the validity of the Marshmallow Experiment is in question, it is apt as a modern parable on the importance of foregoing small rewards today to enjoy bigger rewards tomorrow.
For instance, if you postpone watching YouTube videos right now and instead focus on your passion project, you will complete it sooner.
At work, if you postpone checking emails and social media till later in the day, you will get more work done during the fresh morning hours.
This is the first thought that should come into your mind when you prioritize short-term selling over a long-term strategy – that short-term selling is instant gratification.
For instance, some entrepreneurs will even dupe customers into making a purchase that is not really valuable to the customer, provided they get the sale.
While this might get you a sale today, it will have lost you a customer from whom you would have earned much more in future.
On the other hand, someone who has a long term mindset focuses on developing relationships, even if it means not making any sale in the present.
Eventually, they are able to derive more value from the customer than they would have done if they had just focused on making a single sale upfront.
THE INCREDIBLE FORESIGHT OF JEFF BEZOS AND AMAZON: THINK BIG NOT SMALL
To understand the beauty of long-term thinking, I find it necessary to take a look at a little online bookstore that grew up to be one of the Big Four technology companies (alongside Google, Apple, and Facebook).
This little online bookstore is none other than Amazon, the online retail giant.
Jeff Bezos founded Amazon on July 5, 1994 in Bellevue, Washington. Note that unlike most technology companies, Amazon is not based in Silicon Valley. Amazon’s current headquarters are at Seattle, Washington.
In the early years, Amazon was not a profitable company, and stockholders raised complaints about the slow growth. It was not until the first quarter of 2001 that the company turned its first profit: only $5 million.
The company made its first ever annual profit in 2003, after having been in operation for 9 years.
The company focused on long-term growth, not short-term profit, a strategy that has proven exceedingly wise, as the company now makes enormous profits.
Surprisingly, its focus on long term growth over short term profitability contributed in the company’s ability to survive the dot com bubble burst, which took down with it several other tech companies.
Jeff Bezos has described Amazon’s approach as long-term strategy with “heads down” focus on the customer.
From the beginning, Jeff Bezos understood that the key to lasting business success is satisfied customers.
He once said his company is built on three major ideas: thinking ahead, being obsessed with customer service, and a willingness to invent.
Many companies worry about the competition, but Bezos understood that once you win over the customer, you have no competition.
Amazon’s most important intellectual property, said Bezos, is its brand.
With this in mind, Jeff Bezos guided the company to maintain its brand image by providing fast shipping, quality service, and convenience for customers.
The idea was to conduct business in a way that aligned as perfectly as possible with human wants.
For instance, when you buy online, you want the process to be as easy as possible and your order to arrive swiftly.
The goal Bezos set for his staff from early on was “to build a valuable and lasting company”. Most businesses that milk short-term profits lack a long-term vision.
Jeff Bezos ensured his company was different. Even today, Bezos still encourages long-term investments even when they do not guarantee an immediate return on investment.
Bezos’s growth-minded approach meant that the company was willing to spend money to make money.
This meant foregoing annual profit for years, as the company cut prices, introduced free shipping, and invested in developing new devices such as the Kindle e-reader.
Today, Amazon is so big that its workforce is over 575,000 people – this is nearly the size of Luxembourg’s population.
The company provides hundreds of thousands of third-party merchants with storage, logistics, loans, and a selling platform.
In addition, Amazon’s profitable cloud computing division, Amazon Web Services, is the industry’s global leader.
In the fourth quarter of 2017, Amazon reported $1.86 billion in net income. Get this: what Amazon made during that quarter alone is equivalent to what the company made in 14 years of cumulative profits since its May 1997 IPO.
More recently, in the first quarter of 2019, Amazon has made a record-high profit that is more than double of what investors predicted.
The company generated $59.7 billion revenue and an operating income of $4.4 billion. Net income was $3.6 billion.
Today, Amazon is counted not only among the most valuable companies in the world, but also among the most profitable.
It has achieved this through foregoing short-term profits early on to focus on long-term success. Clearly Amazon would have passed the Marshmallow Test.
LEARN TO SPOT POTENTIAL MENTORS
Sometimes making a sale is not the best gain that can be made out of a business relationship. Assuming you are a fledgling entrepreneur, what you need more than profits is clarified thinking.
You need the wisdom of someone else’s experience to ensure you don’t have to learn through painful experience.
You can get such wisdom from business books, but the thing about books is that they are static. You can’t ask them questions. They only allow so much nuance.
Books are written to express a specific point, but real-life experience is usually more complex.
The only way to navigate the complexities of real-world business is to talk with a businessperson who has been there, done that.
When you meet such an individual, do you focus on making a short-term sale, or do you take a pause to consider the big picture and see how you can profit from this relationship in the long-term?
I am not saying that you should not make the sale.
What I am saying is that you should try to take your eyes off the sale first and look at the big picture.
The sale can be the starting point of your relationship, but it should not be the end.
An experienced entrepreneur can give you much needed mentorship.
All you have to do is build a good rapport with them and move on from there.
Who knows – they could even transition from a customer to an investor.
In many cases, struggling businesses don’t need more money.
They need better strategies. Pouring money into a bad strategy will only lose you money, but a good strategy will work out in your favor eventually, provided you see it through.
Sometimes, only someone who has been in that situation will be able to see the mistakes you are making and give you a better strategy.
The key to winning mentors over to your side is asking yourself one simple question: “What value can I offer them?” Don’t go in with a take-take mentality. What you need to do is to adopt a give-take mentality instead.
If you help them out in some way, particularly in their business, they will naturally feel grateful and admire your restraint in not asking for something right away – a sign of the kind of long-term thinking and delayed gratification they know goes far in business.
Having earned their attention, you can earn their respect by asking for their advice instead of their money. Respect goes a long way in the world of business.
To summarize this thought, focus on giving value, building meaningful relationships, and keeping an eye on what is truly important in the long run.
With this strategy, organic success is sure to follow.
THE PERILS OF GIVING DISCOUNTS
One of the key business skills that lead to success in selling goods is inventory management.
If you handle your inventory properly and price your merchandise appropriately, your business has a high chance of turning a profit.
The problem is you can’t always predict how much merchandise is enough or too much.
This is especially problematic when you are dealing in seasonal merchandise – for instance, Christmas lights.
In such a case, determining how much merchandise to stock up is a mix of experience, instinct, and gambling.
On the one hand, if you don’t have enough merchandise, your customers will flock to your competition.
On the other hand, if you have too much, you might make a loss as your excess stock continues to sit in storage when the season is over.
One way to get rid of excessive stock is offering discounts. Discounts are a great way to sell more goods and make more profits.
However, discounts are, in fact, a short-term selling strategy and could hurt your business in the long run.
The problem with making a habit of relying on discounts to get rid of excess stock and make quick profits is that you train your customers to wait for the discounts.
Furthermore, discounts punish loyal customers who are more likely to have bought goods earlier on at full price.
Discounts are an excellent short-term tactic, but as a long-term strategy they are risky.
Discounting is dangerous because it conditions your customer into devaluing your product.
A case in point is when Apple offered the iPhone XR for $4449, a price that was $300 less than the official sticker price.
Consistency and reliability are central to good branding. To protect the long-term value of your brand, you must practice disciplined marketing and be willing to forego short-term profits.
Short-term financial gains are very tempting. They are obvious and quantifiable. It is literally having cash in your pocket.
On the other hand, the long-term benefits of having a strong brand can seem vague and are not easy to quantify.
Nevertheless, as an entrepreneur, you must be disciplined and avoid the temptation of short-term selling, lest you forfeit long-term success.
SHORT-TERM THINKING IS EVERYWHERE: DARE TO STAND OUT
In 2018, a coalition of 200 CEOS from the US’s leading companies raised alarm that short-term thinking has becoming a big threat to the US economy.
Warren Buffet, CEO of Berkshire Hathaway, and Jamie Dimon, CEO of JP Morgan Chase, wrote in a Wall Street Journal op-ed that the market’s addiction to quarterly targets has led to companies sacrificing long-term strategy, growth, and sustainability for the sake of short-term profits.
Nowadays CEOS are under high pressure to deliver quarterly results.
Last year, one of the questions Mark Zuckerberg had to answer before Congress was about Facebook prioritizing short-term profits over the protection of user’s personal information.
The allegations, whether true or false, of Facebook sharing user data with third parties have affected the company’s image.
Another case of short-term mindset leading a big business astray is the Wells Fargo account fraud scandal, with the bank still under scrutiny from regulators for the creating fake accounts for clients without their consent.
Similarly, the collapse of Lehman Brothers was a direct result of focusing on short term profits rather than long term success.
The bank focused on risky Alt A mortgages to boost their short term earnings, but the collapse of the Alt A lending market (which was impending) led to the collapse of the bank as well.
CEOS are under pressure from demands by activists and others on Wall Street who want them to boost profits from quarter to quarter.
Furthermore, they also face pressure from their own boards and executive teams.
However, about 75% of the US market is held by buy-and-hold investors.
This type of investor is, by definition, interested in the long-term value of the companies they invest in.
It can therefore be argued that CEOs should not feel so pressured to chase after short-term results.
Long-term thinking is a common attribute among the most celebrated company builders – Steve Jobs at Apple, Sam Walton at Walmart, Herb Kelleher at Southwest Airlines, and Fred Smith at FedEx.
Consider also that one of the most acclaimed investors of our time, Warren Buffet, is a long-game type of investor, so much so that his preferred holding period is “forever”.
After the 2018 Parkland Shooting, Walmart and Dick’s Sporting Goods made the laudable, ethical decision not to sell guns to anyone younger than 21.
By keeping their eye on the big picture, the two companies attracted good press and gained customer loyalty for doing what was right.
Walmart had already banned sales of assault-style guns back in 2015, an even more impressive example of foregoing short-term profits.
Back in 2014, CVS Health was the first national retail pharmacy chain to quit selling cigarettes and other tobacco products in all its stores.
The company felt that selling cigarettes conflicted with the core purpose of a pharmacy, which is to help people on their path to better health.
This gutsy move cost CVS Health $2 billion a year in revenues. The company also suffered a 7% drop in its stock price on the day CEO Larry Merlo announced the plan.
Larry Merlo had his eyes on the big picture and was playing the long game.
He believed that to transform CVS Health into a successful healthcare company, he needed to build credibility for the company. Time has proven him wise.
CVS Health became financially strong enough to acquire Aetna, the giant health insurer. Furthermore, today CVS Merlo is growing rapidly.
Short-term selling is instant gratification. You might achieve some small gains at present, but this is usually done at the expense of even greater gains in future.
As an entrepreneur, the question you should ask yourself is this: do you want to make money today, or do you want to build an enduring business?
If it is latter, you must develop the discipline to forego short-term profits where short-term selling would harm your business’s long-term health.
Note that this article does not advocate a disregard of profit-making.
What we are arguing is simple: while it is important to focus on the now, don’t let the focus on short term gains derail you from your business’ long term goals.
As an entrepreneur seeking to grow your business or make money from your invention, there is a very …