Tag: small business

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Small Business Mistake Study – Part I

Recently I was introduced to yet another small business with whole bunch of small business issues and the owner team who just don’t know any better. They, however, don’t believe it, so before this business perishes into nothing, I have a chance to study all the mistakes that were made and are being made. Here’s your chance to learn, too.

The scoop is as follows. It’s a service oriented business – think very niche cosmetic service with extra expensive equipment. It’s a startup – business isn’t even year old yet. Two non-working partners, one provides the equipment, another one is actually trying to manage the business (he never worked in this business before). Two workers, both part-time, who are only paid commissions for cosmetic procedures they perform on clients. Cell phone to take client’s calls. Company is renting a room at another salon to perform procedures.

Issue 1: Human Resources
This one is first, because it’s the most major issue in the business. Since this is a startup, everything rests upon the shoulders of people who work for business. Now, the partner who runs the business spends enormous amounts of time to watch the two people who work for him. Being technologically challenged, he calls whoever has the company’s cell phone for 20 times a day to check how things are going and if there are any appointments made. He also made a deal with salon owner to check how many clients come in every day when one of his people is working. He clearly has an issue with trusting his own employees (those who work on commissions only because business hasn’t got up on its feet yet) and doesn’t bother to hide it. This, however, didn’t prevent him from demanding that they would take phone calls on their personal phones (they declined it), that they come up with better ways for him to track their performance (they ignored it) and that they take incoming calls throughout the whole week on their personal time outside of work (they agreed because that’s the only way they can book enough appointments to make it worth working in this business). All appointments are written into the journal, so every time the shift changes (each part time employee works a few days every other week) both workers have to find ways to transfer the journal and cell phone to each other.

Of course such treatment from the managing partner doesn’t win employees’ hearts. Aside from openly despising their manager, employees don’t particularly pay much attention neither to quality of the services performed nor to a higher level of customer service. In a market where customer services is by far the most significant competitive advantage, it’s completely lost on this company. Additionally, given that employees are only paid commissions for performed procedures, they have zero incentive to work an extra minute, so they always stuff as many appointments as possible into as little time frame as they possibly can. Given that clients oftentimes don’t show up it proved to be a worthy tactics, but on the days when everyone shows up on time – it gets a bit messy.

(To be continued)

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business

Tradeoffs Small Businesses Make Are Wrong

Tradeoff triangle - speed, price, quality - Small Business Blog The trade-offs that small businesses are making are wrong. Well, most of them are. Look at the picture on the left and it will get obvious that you can’t just tweak one of the parameters without compromising other two.

Here’s where it gets tricky. Sometimes, during negotiations, when clients ask me how much would something cost I say I can do cheap, good, fast – pick any two. What should come to no surprise to anyone is that clients almost always pick “cheap” first. Then they add “good”. Then, after some thinking, they say “and I don’t want it to drag into next year”. It’ not just that this is “crisis” and people are short on cash. It’s the way of thinking of small business owner. Guess what’s wrong with this picture?

You think nothing? Alright, read on.

First of all – once any business you’re dealing with (and we are talking about B2B here) hears you pick “cheap” first – they think you are cheap and rightly so. What you probably missing is the departure of their train of though. If you are cheap – they better off try their chances somewhere else where they can make more money. Oops. You just lost a valuable partner, future investor or a bunch of referrals.

Second – when they hear you pick “good” as a second, they immediately project this on your product or service. If “good” comes second for you when you are getting something for your business, it means you are not making goods or services good in the first place, you are making them cheap. And if they turn out to be good – it’s an added benefit. Oops again – you just did more damage to your image or brand than all your competition together.

Third – when they hear your projected time line is “sometime before next year” – they get a really good understanding of your take on schedules and deadlines. That is – if they are still listening at this point.

You can see that a natural response from most small business owners is damaging their reputation – in both short and long term. Even though there is no right answer to this question (strictly speaking), any business owner who want their business to grow should know how to answer that. How? Next post would elaborate on that.

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business

Small Business Issues – 7 Areas To Expect Most of The Trouble

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.