While my fascination with Google Wave is settling I want to go back to what this blog is all about – small business. It’s no secret that most of small businesses concentrate on surviving and becoming profitable. News are full of glamorous stories about glorious start-ups. In real life there are thousands of less known ventures and businesses that are alive and kicking – every day. Success of a small business is, indeed, in moving from failure to failure. As long as each failure results in small business owner learning valuable lesson.
We have recently completed a company analysis for $1.5M business. Scratch that. Recently we have completed an analysis of 10-year old successful company that had just found out they are worth well over a million dollars. They though their worth was around $200K and they treated their business as such. Problems we have uncovered and presented to the owners are not uncommon. Even more so, I would dare to say that most small business’ problems are falling under one of seven main categories:
1. Business owner/Leadership issues. Business owner may lack vision, being stuck in a day to day routine. Business owner may, on the other hand, have too broad a vision, trying to compete in all areas at once. Either way business looses.
2. Human Resources issues. Speaking of small business owners it is always hard for the owner to find a person they can trust. Money are tight, there’s never enough time so the owner is convinced that any new person will not be a good fit for the company. Maybe some time later. Being able to delegate solving secondary problems is a virtue not many small business owners possess.
3. Innovation issues. Most of the businesses are shy of innovation because they shy of money. Or so they think and so they say. In some cases it might be true. However in most cases innovation (not necessarily technological – it could be just a different approach to sales) is the ultimate source of company’s strategic growth. Just because it was working before – doesn’t mean it will work the same in the future. But even if it will – would you rather make the same money or double that?
4. Marketing and sales issues. Most people create their business because they know how to do something, not how to sell it. They think once they start offering their services people will come. People will, indeed, come – to those who can sell to them. Not knowing how to market themselves, small business owners fail to capture their strategic share of market. Around 75 to 80% of business owners cannot price their services or goods properly.
5. Operations and logistics issues. This area is so broad that I would probably have to create another post just for that. Most small businesses fail to understand the importance of the fine-tuned operations. Maybe you spend too much time going to suppliers when for little extra money you can have them deliver to you – while you be making much more money rather than putting your business on hold. Or maybe your people are doing the double work by filing documents in both paper and electronic forms. Or maybe there is something else. Time is the most scarce resource that you have, and operations issues are the biggest time waster.
6. Legal issues. This is a can of worms of its own. Do you have all the licenses you need to run your business? Are you covered in all states and counties you operate? Do you have insurance that will cover you in case something happens? Have you filed all your tax reports on time? You may be surprised at how tricky these things can be.
7. Financial issues. This is the item most of business owners would have put first, so I am deliberately putting it last. You think you have money problem? You might be right. The reason for that is that you are having some of the issues from the list above on your hands. Either way you are not collecting enough sales, or your expenses are too high, or both. Unless, of course, your business model is flawed, but that’s whole another story.
So what is the outcome of the analysis that any small business should do? Identify the most flawed areas and fix them – one by one. Don’t wait, don’t put major things off – the larger the company the harder is it to change things there. So start early, move fast. Today is a good day for change.