I'm a small business coach, and having spent much time with many owners and entrepreneurs, I have come to see some common patterns in their most pressing problems.
Small businesses vary wildly from boutique $2,000-per-month consulting services to high-volume bakeries that hand over three cookies for a dollar.
Still, the same five small business problems keep emerging for nearly all, no matter size or revenues:
- Time Mismanagement: too many small businesses get stuck carrying out daily tasks of providing their product or services rather than working on their business growth. I wrote a whole post about escaping the small business grinder! Do read it.
- Lack of vision.
- Lack of systematized, documented processes, procedures, roles and responsibilities. I know: boring! But having these in place translates into profits. More below.
- Ignorance/lack of interest of the numbers. A few episodes of Marcus Lemonis’ The Profit on CNBC reveals how critical it is for a business owner to understand product/service costs before pricing.
- Short term thinking. Small business owners must invest to win. Putting a little extra effort and money in the beginning saves astronomical effort through the middle and at the end.
I’ll discuss more about the risks of falling victim to each and the rewards of getting them right below.
Name Small Business Problems and You’re Halfway to Solving Them
Consider my client Julian, an installer of fine (even priceless) art and sculpture whose clients live in La Jolla, Del Mar and Rancho Santa Fe. Julian is a precision guy, tasked with getting measurements and lighting perfect for very discerning home and business owners. He must measure the weight of each piece as well the capacities each wall and ceiling has to support them. Yes, Julian has insurance.
I’m doubt any other of my clients has a target market with higher expectations. I understood, therefore, why Julian insisted on doing most of the installations himself.
Business owner dedication to quality service helps him or her thrive. Still, as Julian’s reputation grew, orders for his services began to outpace his ability to complete them. Large stone sculptures and fine art with heavy frames often required Julian and one or two assistants carry out the hanging tasks. More, home and businesses owners with upcoming parties or important business meetings needed the art up in a short period of time. Did Julian dare send one of his assistants?
Further complicating things was the fact that training a lower-level installer took time away from Julian’s precision work. Then, installer prospects that responded to his ads for $12/hour workers weren’t of the highest quality. They often left after only a few months’ work, squandering all of the skills Julian had painstakingly imparted. These elements added up to a business that had high demand but was still struggling.
Which Common Small Business Problems Risk Dooming Julian’s Business?
Julian has a thriving business but it’s causing him all kinds of stress AND insufficient revenues. Worse, he’s not capturing the business opportunities his hard work has earned him. Which of the following small business problems do you think Julian should tackle first?
|Small Business Problems
|Risks of Falling Victim
|Rewards of Executing Correctly
|Business revenues eternally capped at the level to which the business owner can carry out all of the work orders. Business owner working IN business rather than ON business. (Do read that blog post linked above!)
|Business owner freed to work on bringing in more business and letting hired staff carry out duties, deliveries, admin, etc.
|Lack of Vision
|Business owner “takes all comers” or tries to deliver everything to everyone in their niche. This approach quickly leads to low profits, overwork and burnout.
|Business owner specializes and gets the highest pay for unique work.
|Lack of systematized, documented processes, procedures, roles and responsibilities
|Employees constantly take business owners’ time and energy with questions. Employees make crucial mistakes that cost time and money. Employees feel as frustrated as business owners, and may quit.
|Binders with business processes and training provide all employees with workflows and charts to get the work done independently. Employees feel supported and empowered by the business and enjoy solving problems on their own.
|Ignorance/lack of interest of the numbers
|Costs outpace revenues and business fails. Fast.
|Profits stay sufficiently ahead. Margins wide enough to pay for all costs, overhead, taxes and labor, leaving profit for the business.
|Working just to make payroll, not investing in the company especially when some small investment early on can save $1000s or increase growth 10x later.
|Business owners get to celebrate when goals are met. Share celebration with employees to create positive work environment. Win loyal employees by showing that the owner and the business is there for the long haul. Make it clear there is a future and they will join!
Julian is a San Diego Small Business Coach’s Dream
Julian’s art installation business has fallen victim to four of the five most common small business problems listed above.
The only good grade I would give him was that he knew his numbers. One may expect that it’s easier to get a service business’ profits above costs because of the low level of supplies involved. I happen to believe that time is money, however. Each hour a service provider loses is a significant loss of money. Understanding one’s cost of doing business is critical to understanding the value of time in the business, If you know your cost of business is $30 per hour then you will think more about having an employee sit and do nothing for an hour!
Time spent in each of the tasks below takes revenue away from the paying tasks:
- training a new installer
- explaining procedures to a new installer
- spending time on tasks that a lower-paid, less-skilled employee can handle
- researching your target market and understanding how your niche serves them.
All must be worthwhile so that the time lost is recouped several times over the long-haul.
Julian’s primary problem is capacity. If that doesn’t sound like a serious issue to you, rest assured that businesses go OUT of business every day because of the inability to meet customer demand. Turning down business due to overcapacity is a business killer.
We set about putting Julian on the right track with the following steps:
- Brainstormed why $12/hour employees left
- Developed a ladder of employee levels which included
- Apprentice Installer
- Installer I
- Installer II
- Installer III
- Master Installer.
With pay and benefits increasing at each level, new and potential employees were able to see the benefits coming their way when remaining longer with Julian’s company. This documented employment structure has led to higher retention rates and employee satisfaction. The company is beginning to stabilize and will continue to do so after Julian gets his processes, procedures and roles and responsibilities documented. Not only will this save Julian thinking time, but with employees required to read the binders, Julian will waste less money in the form of his time training employees one-on-one.
With these systems in place, Julian is better able to form a long-term view of his business. The long-term view, in turn, helps him structure goals and then the tasks and tracking to reach those goals. Julian now sees his business as a straight-forward series of clear actions rather than a brewing, oppressive black cloud of doom roiling above his head. We have work ahead, but I must say Julian’s demeanor has turned far sunnier in the past few months!
Which small business problems are you struggling with? Can you identify them specifically? Do you know your cost of services or goods? Do you have a capacity problem (not enough labor to meet orders)? What are your short- and long-term goals? Do you have a strategy and action steps for reaching them?
Each week, I schedule three, FREE 50-minute in person or phone consultations. Do you want to be one of them? Contact me here and we’ll set it up! Need to know a little more about my team? Check out my handsome mug here!