There is an urban myth that if a frog is suddenly put into a pot of boiling water, it will jump out and save itself from impending death. But, if the frog is put into lukewarm water, with the temperature rising slowly, the frog will keep trying to adjust and climatise…until it’s too late.
Whether the urban legend is accurate or not, the term “boiling frog syndrome” is often used as a business metaphor to describe the slow, stealthy creep of compromise and complacency, and the failure to act against a problematic situation that will increase in severity, until reaching catastrophic proportions.
The business ownership equivalent of the “Boiling Frog” syndrome is observed more commonly in vet practice ownership than you would think, especially towards the end of a veterinarian’s career. Many once-successful business owners have become mediocre or poor business owners, only because compromises occurred so gradually and incrementally, that they either went unnoticed or they were small enough to make the rectifications that were needed more difficult than getting used to the new normal.
For example, If I told successful business owners that in 5 years their business would have 30% less turnover… most would either start to make drastic changes in the way that they operate, or they would sell now, before the lower revenue compromised the value of the practice.
However, in my experience, if the business reduces its revenue by 6% on a compounding basis for 5 years, there will be a creeping attempt by the business owner to normalise the shrinkage. They give excuses as to why the reduction is temporary (part of an industry-wide trend or business cycle, or ‘business is tough in this area just now’), or by choice (if I worked as hard as I used to, the business would be back in a second). This is the equivalent of the frog treading water that is slowly being heated up, hoping that the heat will eventually go away or that they will grow to be comfortable.
Below are some other examples of small, incremental compromises that can creep into a business, which can severely compromise its value if not caught in time:
- Staff pay rises above industry norms.
- Being reluctant to increase prices, even though the costs of production (wages, rent, consumables) are all going up every year.
- Paying for marketing that is not bringing in a proper return on investment.
Sometimes, an owner operator’s final years in business ownership are marked by a trend of incremental compromises like these, which compound over a few years. If the owner doesn’t have the resources (time, energy, capital) or desire to turn this around, they become like a frog in pot of water that is slowly being heated up.
When this happens, the timing of the business owner’s exit is paramount, not just to the financial wellbeing of their business, but also to themselves post sale.
It is important to realise that in the “Boiling Frog Syndrome”, the frog was not killed because of the boiling water. The frog was killed because it didn’t jump out in time.