I’ve never put together a list of the biggest problems across most small businesses, but if I did the abundance of short-term thinking would be very close to the top of the list.
Short-termism
The release of the results of a recent survey conducted by the Australian Institute of Managers showed that a significant number of corporate executives were worried that “short-termism” was severely impacting the performance of their business:
The global financial crisis is the time when companies should show they’ve learnt from the mistakes of the past, shun short-termism and focus on building long term competitive advantage,
..the CEO of the Australian Institute of Management (Vic/Tas), Ms Susan Heron said….
Companies should ensure they have the business basics right – strategy, cash flow, debt management and investing in their people to build and retain the critical skill sets necessary for long term growth.
You can read more in the AIM press release.
The Death Spiral
In a recent blog post by Seth Godin titled Death Spiral, he talks about the trap that businesses fall into of trying to save money when things are going wrong, which only exacerbates the problem and leads to the death of the company:
The doctor has fewer patients so he doesn’t invest as much in training or staff and so some other patients choose to leave which means that there are even fewer patients…
The newspaper has fewer advertisers, so they can’t invest as much in running stories, so people stop reading it, which means advertisers have less reason to advertise which leaves less money for stories…
What is the answer? I’m sure that when talking about other people’s businesses that most of us can clearly see what it is. However, when it’s our business and we are in the middle of such a situation we do not always look at things objectively and may need to be reminded of what needs to be done.
In Seth’s words:
Right this minute, you still have some cash, some customers, some momentum… Instead of squandering it in a long, slow, death spiral, do something else. Buy a new platform. Move. Find new products for the customers that still trust you.
Change is a bear, but it’s better than death.
A Few Ideas
The focus on the short term usually results in the business being starved of two things: time and money.
Many small business owners will call me crazy for suggesting they need to spend more time on their business. However, to use the language of the popular small business book, The E-Myth, there is a huge difference between working on your business and working in it. Too much focus on the short term usually means spending more time working in the business, however if the problems are related to, say, customers no longer wanting the product that you are offering, then working harder to produce more of that product is unlikely to help greatly.
Instead of just doing more of the same, try allocating time to consider issues such as:
- Why are you the best option available for your clients, and how are you making sure your clients know that;
- If you’re not the best option for your clients, what are you doing to change that in order to give your clients have a compelling reason to buy from you;
- What are you doing to attract and keep the best staff, because the best businesses are rarely built with below average staff;
- How profitable are each of your clients to your business, and are you spending an appropriate amount of time working for each of them.
The other important resource that business owners often withhold from their business is money. Conserving cash seems like a smart thing to do, particularly when economic conditions are tough, and often it is the right thing to do. However, many small business people take this too far and stop spending money on projects that make sense. Worse still, they usually do this at the very time the business needs it most.
Some examples of projects that may make sense, particularly when times are tough, include:
- Hiring an assistant to take the load off your higher paid staff, in turn freeing them up to better serve your clients.
- Investing in some new software that could make life easier and more productive for your staff.
- When hiring new staff, be generous with salary and benefits in order to attract the best person for the job. In the long term this will be a better option than saving a few thousand dollars now, but ending up with with a team member that doesn’t work out.
An Offer From Me
If you, or someone you know, is in the position of running a company that is heading into something similar to a death spiral, you should have someone independent you can talk to. Very few people are able to make objective decisions when put in this situation. If things have reached the point where you can’t even afford to pay for some decent advice, please consider contacting me and we can find a couple of hours to talk through the issues. In just a couple of hours I can’t promise the world, however I know what it’s like to be in a similar situation and it would give me great pleasure to help someone else by providing some fresh ideas and an objective point of view.
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