24 Aug

Is Your Business Wearing You Out?

 

I think it is quite obvious that anyone who has a small business wants that business to be successful.  The business provides them food, shelter, clothing.  It sends their children to school, provides the means for vacations with friends and family; it does a lot.

It is understandable that those who own small businesses put in a lot of hours, a lot of energy, and a lot of emotion into their business.  Why else would you own a business if not to work hard in it to gain the things you want that business to provide for you?

As I observe small business owners I see basically two types;

One type is always busy.  They pursue new clients with a near-obsessive passion.  They sell, sell, sell and then they sell some more.  They may have a plan but the plan is rarely followed or cohesive for the business. Revenue is rising as is blood pressure and frustration over the stress of delivery.  There is no time, energy or resources to do anything else.

The other type works methodically with their business.  They pursue those clients and customers who add value and that they can add value to.  Business processes are well planned and well executed.  Rarely does the business owner worry about who is going to be able to provide the product or service, if it will be delivered as promised, on time and at the stated price.  Stress is at a minimum, time exists to further improve the business and quality time away from work is regular.

Often times both of these owners have the same dreams, the same goals for their business.  Why do they operate so differently?

According to some sources, as many as 95% of all small businesses fail within their first five years of operation.  I would suggest that those who do more often are those who chase revenue instead of operating methodically. 

The failure rate of business, at least in my experience, is often driven by unrealistic expectations of small business owners.  They seem to believe they will earn a comfortable living within their first year of operation most often paying themselves from part of their initial investment capital instead of from a percentage of actual revenue.  This practice, a form of very poor cash flow management, is sometimes not viewed as bad until it is too late to recover.  Desperate acts by desperate business owners take away good business practices and replace them with frantic effort to do anything to save the business.  These frequently fail.  Sadly, there are many who advise business owners in these circumstances to pursue these frantic business damaging efforts.

Business owners who take the advice to sell, sell, sell, who ignore the advice to pay attention to ALL of the details as you grow, end up as former business owners.  Those who sell, sell, sell, fail to understand the reality of capacity, of focusing on customers and clients who add value, the necessity for delivering the product or service, if it will be delivered as promised, on time and at the stated price.

Chasing any dollar is not good for your business.  Just because someone pays you money doesn’t mean that your business is becoming successful any more than it means you are profitable.  I know of several business owners who lose money on every job they perform.  Why, several reasons, among them, are:

  • Flaws in pricing,
  • Inefficiency in process, and,
  • Excessive Cost of Goods Sold (COGS).

These are just a few.  As I have written before, there are only 8 key functions in your business and all 8 must work together, in balance with each other, in order for your business to be as efficient and profitable as possible.  Learning to manage all 8 takes time and effort but the reward is great.  What happens when a business starts to experience inefficiency and becoming out of balance as a result is the owner starts chasing the dollars.  This, as I’ve said above, creates work, work, work, draining both you and your profitability.

If you aren’t sure how to get your business in balance ask for help.  If you know how but aren’t doing it, ask yourself why.  The bottom line is your bottom line.

 

Want to know more? Ask me, I’m here to help.