small business (3)

Browse Tag: small business

Small Business Motivation Problem

Quite often I see the same issue repeating itself over and over again. There’s a small business which operates almost on a shoestring budget. Then there’s a business owner who, out of all things, afraid to move in either direction because it is quite clear to him – one wrong move and he’s out of the money and out of the business. Then employees come into picture and start pressuring business owner for raise, more perks or simply new equipment.

If he concedes – he’s back to the same issue of money shortage. If he refuses – employees become less and less motivated, until it gets to the point where no work is done. Then the business owner has to go through a whole round of cycling the workforce which is as expensive as it is exhausting.

Every small business, once in a while, hits this rock. Almost every business addresses the issue – one way or another. Some survive. Some – not so much. However, the question remains the same – how to keep employees motivated to work on a lower wage than they could have gotten if they looked hard and long enough? How to deter the motivation degradation, that eventually becomes sand in the gears, fifth wheel in the cart and whatever else you can think of that doesn’t help business moving forward.

First thing any business owner should understand is that no matter what is said and done in the company, unless the employee is a managing partner – he would never care about the business as much as the owner. Even more so, any small business that treats its workers with little respect is doomed to have a low motivation problem. Whatever can be stolen – will be stolen. Whatever can be neglected (even at the risk of having an argument with the boss) will be neglected. Employees will constantly be late, leave early, or, if that’s somehow restricted, will slack off during the day.

As an example I will tell the story about one IT department I used to work for some years ago. The company had pretty much any internet activity restricted and forbidden. There were no Facebook back then, but there were chat rooms, dating sites, discussion forums and other perfect methods of spending a day at work without doing any actual work. As any strong medicine this had its side effects. People were unable to find the information they needed. There were no blogs, but there was some technical documentation, newsgroups and forums, where actual meaningful discussion ensued. Ah, those were the good old days. It turned out, IT people spent enormous amounts of time carving multiple workarounds to access the sites they needed. Sites they needed to do their work, mind you, but once you’re breathing the freedom – you want to fully explore it. Having those boundaries not be in place – any worker could have the information he or she needs in minutes and would go back to work. But creating walls around people to make them work harder achieves only one thing – making sure these people will try to traverse these walls as hard as possible – work or no work.

So what does this has to do with motivation? Everything! Given the right motivation people would be willing to sacrifice other things. As an example – the organization above had one of the fastest internet connections at that time, so for any IT geek it was obviously a better place to work. I know, sounds funny, but that was the case.

Many small business owners are too afraid to look deep into their employees. Everybody’s got their reasons, of course, but generally they’re afraid to be met with ignorance. However the case may be, business owners should still try and understand – what drives this person? Why did they choose to work for me? What’s in it for them? Maybe it sounds like a too much of a job – to look into that $10/hour kid, but it may bring back a lot more value. Maybe your business could become a major stepping stone in this kid’s career, so he will be willing to go an extra mile or two for a good reference and valuable experience.

An extra mile or two from every employee in a company totals for a good deal of distance these people are willing to carry your business for free. It isn’t something a business owner should easily overlook – especially one with strained budget.

Small Business Issues – Part IV

Since I have covered this business in three posts already it would have been worth it to post an update as events unfold. If you’ve missed it here’s the required reading – Part 1, Part 2 and Part 3 respectively.

The way thing were unfolding the business was supposed to crumble in 6 to 7 months. At least that was the term I have predicted based on all the issues I had uncovered back in March. So overall-  from my point of view at the moment – this company has got until about August to shut its doors. When I communicated this to the business’ manager he, obviously, didn’t quite trust me. We haven’t built that trust yet, as I was only doing initial assessment. Turned out I should have been paying more attention to the depth of the problems. But before we get to the conclusion – here’s issue #4 – problems with sales and marketing.

Although I’ve covered marketing somewhat in previous posts, I completely skipped on the way the pricing was made. As you may already know (and if you don’t – read on with more attention) the initial pricing is build based upon your cost of running business plus the margin. In other words, if the cost of doing business (CODB) per client is $100 and your margin is 20% (all numbers are not real and are just for example’s sake) then your minimum price of service per client should be $120. If you go lower than that then there is no point to be in business at all. You may slightly deviate in one way or another, based on market conditions, your own value proposition and competitive advantages you possess, but that’s how you determine the initial pricing. Once you’re ON the market – you can (and you must) take steps to reduce CODB and increase margins. Market won’t let you go far off the median – unless, of course, you’re government-mandated monopoly, like AT&T or cable companies.

So for this company in question the pricing structure was determined at the whim of the managing partner. Employees’ salaries tied in directly as a percentage of the price of service and, therefore, are also at the same whim. Having heard about so many promotions and sales event but having absolutely zero knowledge of how these things worked this partner distributed flyers and promo cards with 10, 20, 30 or – the latest – a 50% discount. Funny part is that his two employees who actually performed the services and collected the money found out about promotions from clients who showed up with promo materials. Of course with rates already lowest on the market their salaries were discounted into ranges of minimum wages or less. From previous experience I can attest that sometimes expensive places do these kinds of promotions for a very limited time to get new clients in. Experienced sales people pitch more expensive services that span longer periods of time, so overall this tactic is very successful. But just discounting your service by 50% out of nowhere is a message to the employees “we’re going out of business, grab what have left before we close our doors“. To the clients it reads like “we’re so cheap that McDonald’s looks like 5-star restaurant compared to us“.

As you may have imagined already the employees’ outrage resulting from latest 50% pricing cut was on par with recent volcano eruption. Both employees have quit on the spot. There wasn’t much of quitting involved though – the volume of clients only allowed for one and a half day of work per week.

Having said all that I must admin – I was (again!) being overly optimistic about those 6 to 7 months, it all fell down in less than three. In my defense I can only say that I based those assumptions on brief initial analysis.

But We Already Have A Web Site, What Do We Need A New One For?

The small business owners just don’t get it. We, the technical types, can hype ourselves about HTML5, Flash, patterns, interactivity, social features, geolocation and other cool buzzwords, but regular small shop owner couldn’t care less. They have enough on their hands to worry about, so why should they care about brand new web site if they already have “a web site”? Just because you want their money it doesn’t mean they are willing to give it to you.

Here’s what you can you, as a small business owner, should know about the web site and his business. First of all – even though you may not realize it, people are talking about your business. With the proliferation of the web sites like Yelp, Kirtsy and omnipresent Craigslist, there’s always somebody talking. As an example, let me tell you a little story of one of my remote relatives who owns a shoe repair business in Williamsburg.

One day he came back from work and told his family that one of his clients told him that someone somewhere on the internet posted that his business has closed. Family council have decided to take immediate measures and my number was dialed. I was told to fix the internet or whatever was saying that his business is closed. As you can imagine – I was thrilled at the task of fixing the whole internet on such a short notice. As it turned out – it was nothing more than some weird check box on Yelp’s web site that anyone can tick signifying that business has closed. Of course, there’s no way for Yelp to verify that, so they have just gladly accepted it – just like they did accept my correction of this. In just a click of the mouse the internet was repaired and continued to go on as usual.

As I have read, with much amusement, the business already had quite a few reviews. Most of them discussed the pricing structure – or rather a lack of one. A few more things here and there that I thought my relative should have known about – and I was ready to bring the happy news back to him.

What this boils down to is this – now matter how small your business are, in this day and age, there’s something online about your business. If it’s not your web site – then it’s someone else’s rant about your business (not necessarily a happy one). If, after such a rant, your potential client will see a web site that was designed by an 8-year old, that potential client will never become a real one. A few years ago you only competed for customers’ attention amongst your competition, but you always were. Now you’re competing against a number of sites that hold numerous reviews and ratings, people’s blogs and tweets and whatever else. Keeping up with all that flow of information with old and antiquated web site is just impossible.