Thorny business problems: The top 10
Frustration! It may be a cash-flow problem, a disorganized filing system or a problem with personnel management. Whatever it is, you might be encountering one of the top 10 thorny business problems of the 1980s and 1990s. You're not alone. Every manager is susceptible to these ornery problems. But with careful thought and study, almost any manager can meet "The Top 10" head-on.
Lack of cash Cash-flow problems may well be today's most common small- and mid-sized-business problem, particularly during company growth spurts. If you find your sales--and your receivables--rising fast, brace yourself for a cash crunch. Couple soaring receivables with heavy loans and upcoming credit obligations and you could be in trouble.
To combat cash-flow problems, arrange a long-term line of credit with your banker or consider increasing outside equity in your business once you reach a certain level of growth. Another option is to aim for controlled growth: attempt to match increased sales with your ability to finance those sales out of current revenue. Finally, plot a month-by-month cash-flow budget to aid you in year-round cash planning.
Lack of information One-person business operations rarely have information problems. But take on another person or two and suddenly you must monitor what is going on in every facet of your business. Things such as inventory level, end-of-month profit-and-loss figures, sales statistics and new orders can easily escape your attention when you allow other people to manage for you.
To eliminate your information problems, require monthly reports from key employees and be specific about the kind of statistics you need. Bring in a computer programmer or a systems analyst to evaluate the data you get from your information systems. Don't hesitate to set up new record-keeping systems to monitor key business activity, even if these systems consume valuable staff time. If the information is important, you can justify the expenditure in the long run.
No variable budget Most firms have a "fixed" budget to cover overhead and an allowance for production costs. As production falls or rises, however, so should the production budget covering variable costs. Failure to separate the relatively stable overhead budget from the variable budget can lead to unplanned expenditures, waste and inefficient production planning.
A relatively simple solution is to develop a fixed budget for overhead and a variable budget for production well before the start of each fiscal year. Set up a monitoring system to review production figures each month and make adjustments in your variable spending accordingly. If you've never developed a variable budget, ask your accountant for help. It's simpler than you might think.
People Employees and contractors may keep your books, service your accounts and handle just about every business chore you can imagine. They'll provide the impetus for business growth. But if you do not manage them well, other people will plague you with problems ranging from excessive absenteeism to poor service. Poor employee-selection procedures and inadequate training and supervision will, most assuredly, create morale problems, inefficiency and waste every step of the way.
Look for employees who can complement your own skills and strengths. Interview carefully and be sure you check references on every prospective employee. Train your people well and provide opportunities for job growth. Be fair but firm, and hold your people accountable for specific, measurable on-the-job performance. If you must take disciplinary action against an employee or terminate an employee, be sure you document the reasons for doing so in advance. (See "Avoid legal grief when firing employees," page 18.). This simple practice can save you legal and arbitration costs later on.
Lack of strategic marketing Most small-business founders supply a service they believe will entice buyers on its strengths alone. These enthusiastic founders, however, sometimes fail to study the harsh realities of the marketplace--and don't know how to position their company before the buying public or the trade. Lack of marketing savvy in positioning can result in lower-than-anticipated growth or even potential failure.
Bring in a marketing or promotional consultant before you launch a new service or expand into new territory. Develop a complete marketing plan before you begin to promote your firm and follow it step by step. Write promotional materials, and be ready to place ads before you are ready to begin offering the new services. Finally, focus on those segments of the market most likely to buy your product. You will likely get more bang from your marketing dollars this way, and success withthis lower-risk market segment may give you the track record you need for expansion.
Poor policies and procedures "Policies" are the general rules and conditions under which your business operates. Conversely, "procedures" prescribe the way things are done each day. Policies and procedures dictate the volume discounts you give on sales, the number of vacation days to which your employees are entitled, even the appearance of your memoranda and business forms. If you fail to standardize routine business practices, you'll end up reinventing the wheel every time you encounter a routine problem or the need for a decision.
To meet this potential problem, systematically develop a policy and procedure manual, if you don't already have one. Every time you encounter a simple problem or must make a routine decision, write a simple and concise policy or procedure dealing with the issue at hand and file it in your manual. This is a minor investment in time, but it will save you and your employees many hours of aggravation later on.
Regulations Whether you like it or not, you must deal with the IRS, the county clerk and various licensing bodies. You must conform to environmental regulations, truth-in-advertising laws, fair-employment guidelines and more. If you're not familiar with the laws and regulations that affect your firm, you could find yourself in unexpected trouble some day and be forced to pay heavy fines or penalties for unintentional non-compliance.
See if your county or state government has a one-stop "shopping center" for business owners and entrepreneurs. This one-stop center will provide you with all the rules, regulations and laws that might affect you and, perhaps, even help you file the appropriate forms. Alternatively, sit down with your attorney every year or two for a legal audit. The knowledge you gain will give you peace of mind.
Poor time management The term "time management" is really a misnomer. "Managing time" means "managing yourself." If you go through a typical day and never have time left over--or if you constantly find yourself putting out brush fires--you may well have a time-management problem.
Take a course in time management or personal organization, or just spend a few hours immersed in a time-management book. More simply, however, identify the tasks and issues you face each day in priority order. Tackle the most important items first. Delegate the less important items, and give yourself "quiet time" to work on important projects. The payoff in personal productivity is usually great.
Lack of long-range planning Do you know where your business firm is going in the years ahead? Can you detail, in step-by-step fashion, expected growth in your sales, profits and customer base for each of the next 5 years? Can you describe the strategy you believe will make your growth possible? If you can't, you may be like the harried, proverbial traveler who doesn't know how to reach his destination because he doesn't know where he wants to go.
Chart your aspirations out year by year for the next 5 years. Be as specific as possible about your goals. Then ask yourself what you must do to reach them. If you feel uncomfortable about long-range planning, or you're not sure where to begin, ask a small-business consultant or your accountant to assist you in getting started.
You Few owners or managers are so versatile and knowledgeable that they know everything there is to know about running a business. Face it, business is becoming much more complex with each passing year. If you try to base important decisions strictly on your own hunches or even your own knowledge, you may be heading for trouble.
Bring in a partner, an employee, a consultant or even a wise friend to balance out your weaknesses, aptitudes and experience. If you're strong on finance, for instance, make sure you get sufficient technical advice. If you're not a people person, find someone who can help you with workforce issues. If you really enjoy putting your service program together but hate to sell, find someone who can help you with marketing. Recognize both your strengths and your weaknesses, find ways to balance them, and your business should begin to grow.
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