The Greatest Challenge to Small Business.
Remember Richard Dawson and the myriad of other hosts on the TV game show ‘Family Feud’? Suppose there were 2 family owned private businesses competing on this show. The question is… What is the greatest challenge for a Small Business?
I have little doubt that the top answers would most likely be… & the survey says…
• Cash Flow – X
• Driving Sales – XX
• Profits – XXX
I contend these might be the most popular answers but not the correct / accurate answer. This largely explains why the average failure rate is so significant for small businesses. California has the highest failure rate at nearly 70%.
In my limited exposure over the past year assessing and working with a significant number of small business owners, across multiple industries, the biggest challenge, problem, obstacle is the “Owner’s mindset.”
Far too many have a great idea or start a business after years of experience in a specific craft or job. This does not qualify them to run a business. They like control to put it mildly. Many don’t have a business plan, ‘exit strategy’ are foreign words, and they have egos larger than some of the Fortune 500 CEOs.
In FDR’s first Inaugural Address, he said; “The Only Thing We Have to Fear Is Fear Itself”. Entrepreneurs can grow their small business to a point, but then become paralyzed by fear and inability to make timely decisions. Proactive posture is virtually non-existent. The biggest fear is that of ‘change’. A great majority of my work comes long after I assess a business. Business owners are afraid to take proactive action. I get calls 3-6 months later when these small businesses are in much deeper trouble. I can point out the problems & opportunities, but only the Owner can decide on their personal sense of urgency.
The Biggest Challenge is the ‘Owners Mindset’. You can’t treat requested help & expertise as an “Expense”. Change is not an expense, Change is an “Investment!” This is a great example of:
• Short term versus Long term,
• Constant reactive posture versus Proactive planning,
• Control mentality versus Business savvy.
• Do it yourself versus Delegating and utilizing experts (trust issues)
• Needing to be the smartest in the room versus Leveraging talent.
Over 90% of small businesses not only can’t afford ‘strategic’ consulting expertise, but what they really want is ‘tactical’ support for short term impact now. These small business owners don’t want to pay and probably can’t afford that kind of money.
Too many small business owners also think they know what the problem is. This is the biggest difference / reason small businesses stay small or ultimately fail. Far too many entrepreneurs need to be right and in control. They don’t know how to delegate, leverage talent, (internal & external) and leading is a challenge too. I can’t count how many times I’ve heard small business owners tell me… “I know what the problem is, we just need more sales.”
Cause & Effect! Cash Flow, Driving Sales, Profitability … these are all effects, not root causes. The economy admittedly can be both a cause and effect but should never be used as the excuse or crutch. The biggest reason small businesses fail and feel the “effects of poor cash flow, no profitability & limited sales”, is caused by the Owner’s inability to change their Mindset.
An open mind, long term approach and not being afraid of ‘change’ will help small businesses weather most any storm. This will definitely support improved long term health for their small business!
There are great independent strategic and tactical consultants out there to help, myself included. We are here to help. We are an investment, not an expense. Dream Big! Take Action now! Embrace Change before it is too late!
President & ‘Your CFO”
“Your Trusted Alternative to a full time CFO”
Mission Viejo, CA 92692