GM is in tough. They lost $8.6 billion last year, revenues are falling and market share is a downright pathetic 25.5%. Close to 40% of GM’s sales are low margin fleet sales. Fleet sales are to rental car companies or corporate clients. Not only do low margin fleet sales look bad on the Income Statement, used GM products flood the market when these corporate customers are done with them. This hurts resale value and GM’s loyal individual customer gets taken to the cleaners on her trade-in. What a mess.

I think there’s a lot to learn from what GM is going through right now. Although the business you create is unlikely ever to become the pillar of the economy known as GM, take heed of its missteps.

Legacy Costs

Legacy costs are all those costs associated with former employees &8212; particularly pensions and health care. Estimates are that GM has legacy costs of approximately $2000 per vehicle. GM’s cost disadvantage is being exploited by Asian manufacturers who don’t share similar legacy costs because they have a smaller number of former employees.

The lesson here is that you’ve got to fight to stay nimble. You should seek to compensate your employees fairly while maintaining a high degree of flexibility. Think long-term. You shouldn’t lock your company into any contract that has the potential of restricting your options should demand or supply conditions change. It’s tough to fault past executives at GM for all of these legacy costs. Their unions are strong and would have just striked them into submission. Regardless, remember that new entrants can attain a significant cost advantage if you’re locked into contractual obligations and market conditions change.

Customer Owns Your Brand

I’ve mentioned this in earlier posts, but one should never overlook the fact that your customer owns your brand. The Tragedy of General Motors mentions that General Motors products are now consistently reviewed as some of the most reliable in the industry. The trouble is &8212; no one cares. GM produced products of questionable quality for a number of years. Customers and mechanics took note. The word spread. This, in turn, hurt their brand. Winning back their customer’s trust is going to be tough. Your customer owns you and your brand. Don’t take them for granted.

Competition is Unfair

I think it’s natural for small business owners to make excuses for why larger, cash-rich companies are beating them up. Perhaps it’s tough to see how you’re ever going to make it against the big players in your industry. If you’re ever feeling sorry for yourself, recall that the big boys are at a disadvantage too. They can’t develop new initiatives as quickly as a small company can. They have legacy costs. Sometimes their success and corporate culture blinds them to new opportunities in the marketplace. As a small company, it’s your job to exploit this disadvantages.

Right now General Motors is being forced to compete with companies that can produce the exact same car for $2000 less. Well tough. Competition is unfair. You’ve got to use your brain to overcome the obstacles put in your way. Every company has got them.

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