The Small Business Owner’s Conundrum

In the current economic climate, small business owners understand that under-performing is not an option. Not if they want to survive, that is.  They constantly face situations that call for skills or experience they may not possess on their own.  Add to this the fact that small business owners often wear far too many hats and face a unique set of pressures that only they can fully appreciate.

The Pressure Cooker

Small business owner/operators endure a constant balancing act: strategic vs. tactical.  They don’t have to go looking for stress or pressure.  It finds them.

Pressures come from sources like: time shortages, cash flow management, sales and business development, HR/Personnel and working long hours despite exhaustion.  The small business owner experiences the gamut of stress.

With all the hats to wear and work to do, finding time to think strategically is challenging for most small business owners.  Let’s face it, when you are feeling overworked and worn out, it is also difficult to do the proper analysis needed to make well-informed decisions.  The issue is not that smaller companies are too diminutive to benefit from the strategic planning and the disciplined execution that successful large companies do, it is simply that the leaders of small companies, more often than not, lack the time and energy to focus on it.  It is certain that companies of all sizes can benefit from a structured strategy planning process, but the day-to-day chaos must be set to order in allow the time to do it.

Unfortunately, in the meantime, there is a daily toll being taken on the business as a consequence of the non-strategic thinking and the ensuing chaos it brings. Just consider the many decisions made in a single day that occur without a strategic compass to serve as a guide.  If the business decisions are “wrong” or suboptimal, the business is likely wasting time and money.  Of course, the overwhelmed business owner may not even realize that a poor decision was made until much later.  The truth is, it is impossible in most cases to truly know the cost of a poor decision at the time it is made.  Some choices could be putting the business at financial or legal risk, while others might cost a hard earned customer.

A company’s strategy and the associated key outcomes help create momentum and evoke action within the business.  The absence of strategic action has consequences that are more stealthy in nature, such as:

• Missed market opportunities
• The gradual (or in some cases rapid) erosion of competitive advantage to a more strategic thinking competitor
• Insufficient working capital
• Leadership and management skill/talent gaps

Strategic thinking and business planning will not provide immunity to bad decision making, but we all do better with a map to guide us when we find ourselves in unfamiliar territory.  As Michael Gerber would say (author of The E-Myth Revisited), small business owners need more time to deal with “working on the business” than in it.

Changing your environment is imperative.  Here’s why:

In order to grow beyond infancy and turn the corner to becoming a larger enterprise, small business owners must take the initiative to make changes.  Of course there are a large number of factors that are out of the owner’s control, but they can control many.  For instance, changing their business environment to provide more structure for their managers and senior employees to participate in the planning.  Why not involve the very people you are counting on to deliver?  Hand-in-hand with planning is the structure to reward excellent performance relative to goal attainment and provide consequences for sub-par performers. Small business leaders must model the behavior they expect in their employees and institute the business architecture that allows all of this to stick and be successful.

So what are the consequences of doing business as usual?  In a recent article, Is strategic planning for small businesses, or only the “Fortune-ate”?,  the following statistics where provided about the rate of small business failure.

• Only half of all small businesses survive more than five years. (SCORE)
• Only 30% of small businesses survive beyond ten years. (CNN)
• A study of firms found that 85% were still in business after three years, if they had developed a business plan at the outset. (Moya K. Mason)

The reasons for business failure are far-reaching.  So much so, in fact, that it seems more productive to look at factors that cause a small business to succeed.

So what do the survivors do?

Here are the top qualities found in successful small companies:

• The leaders of successful small companies base their decisions in reality, not on opinions, guesses, or desires.
• Successful small businesses focus their planning, with no more than five strategic goals as a rule-of-thumb.
• Successful small companies have goals that are clearly defined and well understood by employees of the company.
• Leaders of successful small businesses provide unambiguous direction to the individuals responsible for reaching the company’s goals.
• Successful small business leaders enforce accountability when it comes to overseeing the day to day execution of the business.  They hold people accountable.
• Successful small businesses implement plans that deliver the highest value opportunities first, faster.

Do you know what’s interesting about these qualities?  They are the very same qualities are found in the most successful Fortune 1000 companies.  So, in fact, the needs of a small business when it comes to corporate strategic and operational planning are fundamentally the same as those for a large organization.

Don’t Think Like a Small Business

The CEO’s of Fortune-1000 companies still operate with the constraint of only having 24 hours in a day to get things done.  Yes, those organizations have greater resources at their disposal than a small business owner does, but both possess the same ability to organize, plan and leverage the assets within their organizations.

Small business operations that institute strategic thinking and the discipline of planning and executing to their strategy (provided the strategic plan has proper analysis behind it and is well-constructed) will attain their business goals and improve performance, just as their larger counterparts do.

Profitability will improve as the organization seeks fresh opportunities and wins new customers. By pursuing strategically-aligned initiatives and avoiding knee-jerk projects that squander precious human capital and financial resources, higher profitability will result and the small business can also enjoy increased productivity as a bonus.  Improved cost management follows, as operational budgets will be attenuated to the accomplishment of strategic goals and profit-minded managers will scrutinize unwarranted or misaligned ventures.  Empowered employees that understand the company’s vision and strategy, will result in better staff retention and satisfaction levels.  The company’s strategy will, of course, be based on an understanding of major competitor’s offerings and value-propositions.  As a result, the small business owner will benefit again, as sales and marketing efforts become focused on reaching the “right” targets and delivering the value-themed messages required to attain new revenue-producing clients/customers and improve interactions with existing ones.

In the end, if you’re a small business leader seeking to remain profitable and grow your company into a large one, a commitment and investment of time to strategic planning and improved operational execution is essential. Just like the “big guys” do.

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Joe is a published author, frequent speaker and recognized expert in corporate strategic planning . Contact Method Frameworks about scheduling Mr. Evans about an upcoming speaking engagement or email requests to media_relations@methodframeworks.com

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