In our daily consulting practice, we see the inside of businesses all over the country, and can make some fairly educated observations about how they run. Small businesses especially are having a tough time running smoothly, in a couple of aspects, operationally and financially.
Smaller businesses, especially service businesses like landscapers, technology companies, contractors painters and other building trades, are having trouble securing loans from local banks to use for working capital or expansion, new equipment, bigger crews, more workers. This type of business often has ebbs and flows in cash availability, either due to seasonality of their business or the size and nature of their work and their customers. Occasionally they need some extra capitol on a short term basis to make payroll and keep good people on the employee rolls until they are needed for the next big job. If they can’t get that extra money, they are forced to cut other staff, benefits or worse, close down temporarily. This up and down cycle, when not mitigated by some cash flow injections, can eventually destroy a small business, even one that is well managed.
1) Qualified Staff Shortage. Operationally, this cash flow issue changes the dynamic among the core of employees, and causes the other problem this type of business faces: scarcity of qualified staff and an employee pool too shallow. If the threat of being laid off comes repeatedly to the rank and file, word spreads in the industrial community and you will have a hard time recruiting good employees. The stress caused by the impending downsize can negatively affect productivity, loyalty and other critical areas of performance.
2) Reduced Risk Profile Stifles Growth. That lack of cash flow can also have a negative effect on management decisions as well. If you’re not sure you can fill that cash gap, but have receivables out there and the next big job is in the pipeline, management will still be reluctant to hire additional employees even when they’re needed. This reduces risk-taking, limits growth and expansion, and slows movement among the employees. Mentoring behavior slows or stops, training dries up, and the whole works can come to a virtual standstill, largely out of fear of that “big job gap”.
3) Know When To Let Go. The third but highly overlooked issue for small businesses these days is making the transition from founder-lead, to goal-driven enterprise. Usually smaller businesses are started by a single individual, who has a skill or a talent. They are successful using those skills and the business grows. They hire some semi-skilled workers to help in specific areas, but the founder still acts as president, chief cook and bottle washer, wearing a huge number of hats on the managerial and administrative side, and still doing the principal work at the same time. If they get caught in this loop for very long, performance suffers, crucial but routine admin work often gets missed or lies fallow for long periods, customer service suffers and eventually work quality will suffer.
The way to break the cycle is for the owner to know when it’s time to find a trusted team to run the jobs and they move over to take a more strategic role. Its a different skill set, but one that can be learned. Finding that team is becoming increasingly difficult, and this is one of the biggest single issues facing small businesses and impeding their growth. Advice for job-seekers out there – look at your skills and experiences and frame them in such a way as to make you attractive to someone seeking a clone of themselves – make yourself appear trustworthy and indispensable, and you’ll get hired in a second.
Growth from within, building a team, creating a chain of command, putting in place a management structure and policies that foster growth, innovation, initiative and empowerment are just as valuable as building up the customer list, and are a form of growth on their own.
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