Tag Archive for 'small business survival'

Take on the law of numbers with grit and fundamentals

A rabbit was being chased by a hungry fox. Running for his life, he hopped over a turtle as he made haste across a small stream. Tucking himself safely inside his shell — not wanting to become collateral damage in the rabbit’s emergency — the turtle inquired about his anxious neighbor’s prospects, “Hey, Mr. Rabbit. You gonna make it?” To which Mr. Rabbit replied over his shoulder, “I GOTTA make it.”

When small business owners wake up in the morning, they often feel like Mr. Rabbit. But why are so many operating so close to the edge of survival? Why is every challenge or opportunity so momentous? Why are their circumstances so much more dramatic than for their Big Business cousins? The answer is found in the law of numbers. Let’s look at just three key examples:

Customers
Big businesses have lots of customers, so losing one is usually not a big percentage of their customer universe. A small business’s customer universe looks more like a list, on which each name represents a much larger percentage of the total. Losing a sale or customer takes a bigger mathematical bite out of the future viability of any small business.

Employees
When an employee leaves a big business, there are probably three replacements ready to be promoted off the bench to that single assignment. But even if there is a bench on a small business team, it isn’t deep. And since there are more jobs to do in a small business than people to do them, every employee is a key employee who’s difficult to replace.

Capital
Big businesses are blessed with multiple capital options, including the equity and debt (bonds) markets. A small business is the stepchild of the capital markets – sometimes more like an orphan. Other than bank loans and whatever retained earnings that can be held onto after taxes, the best way to describe other capital acquisition options is found in the names of the twin brothers of desperation, Slim and None. And even when outside capital is found, it often comes at a prohibitive premium.

With the law of numbers and perilous percentages against them, translating into limited options, small business owners survive by calling on a special kind of “I GOTTA make it” resolve. But, alas, resolve alone isn’t enough. To overcome the reality of their numbers and operate with less desperation they have to combine their grit with a focus on operating fundamentals that address the exposures. For instance:

  • Customers: Know what each expects from you and deliver that within an inch of their lives. This is part of your special sauce and one of your advantages over a big business.
  • Employees: Hire only those who could one day be promotable off of your bench.
  • Capital: Build and maintain good relationships with at least two banks, and retain earnings like your business’ life depends on it. It does.

During The Second Punic War (218 BC), Hannibal crossed the Alps with 35,000 men and a squadron of elephants. When snow blocked their progress, scouts reported the way forward was impossible. Sensing disaster in the eyes of his men, and realizing that this was a test of his leadership, the great Carthaginian general is said to have uttered those words that small business owners say to themselves, and their people, every day: “We must either find a way – or make one.”

Write this on a rock … Like rabbits and generals, small business owners GOTTA make it with a combination of grit and fundamentals.

Plan for success while operating for survival

Blasingame’s 2nd Law of Small Business states: It’s redundant to say “under-capitalized small business.”

Growing small businesses operate in the narrow danger zone between the leading edge and the bleeding edge of the marketplace. And since our capital reserves and options are limited, every small business CEO makes decisions every day that are at once as much about survival as success.

Operate for Survival
Here are four “operate for survival” things to do that will serve you well this year, followed by four “plan for success” ideas.

1. Cash used to be King, today it’s the Emperor. Ask employees to find and cut waste. Get them involved in reviewing operational processes and eliminate or tighten up inefficient ones. What’s their motivation? How about job security? Watch the pennies and the dollars will take care of themselves.

2. Stay close to accounts receivables and cash management. Many tasks can and should be delegated, but in a small business, whether you’re growing or just holding on, cash management is not one of them.

3. Declare war on excess inventory. Inventory is cash you can’t spend until a customer pays for it. Practice Just-In-Time (JIT) inventory management, not just-in-case.

4. Stay close to customers. This isn’t complicated: Ask customers what they want and then give it to them. We’re in the Age of the Customer – know your customers’ expectations.

Plan for Success
Since opportunities will present themselves over the next year, here are four “plan for success” thoughts to consider as you take risks:

1. Eyes wide open. The marketplace we’re entering is going to look different than last year. That means opportunities – and threats – will look different, too.

2. Measure twice, cut once. Before taking a big growth step, apply the carpenter’s rule. Don’t scrimp on due diligence: check your assumptions, recheck your assumptions and then proceed with the best information you have, which might tell you to stop.

3. Mistakes are expensive. Can your capital picture support inevitable mistakes and/or surprises? Remember, there is a very fine line separating opportunity at the leading edge and the cash-eating bleeding edge.

4. Make your banker your partner. Keep him or her informed whether the news is good or bad – especially the bad. Remember this: An uninformed banker is a scared banker and no one ever got any help out of a scared banker.

Successful small business CEOs operate for survival while planning for success.

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I talked more about how to operate for survival while planning for success this week on The Small Business Advocate Show. Click here to listen or download.

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Small business survival strategies for the future

One of the most important things I’ve learned about doing business in the 21st century, where the velocity of change is taking our breath away, is that while it’s still okay to fall in love with what you do, it’s not okay to fall in love with how you do it.  No too many products have become extinct over the past decade, but many market strategies have gone by the boards in that period. Paradigms are shifting all over the place, but not so much on goods and services themselves, as on how our customers acquire and apply those products.

Recently, Wally Bock and I talked about this on my radio program, The Small Business Advocate Show, including specific small business survival strategies we have witnessed, implemented ourselves and helped other implement.

Wally is an original member of my Brain Trust, going all the way back to 1997, and the author of several books, plus his blog, Three Star Leadership Blog. Take a few minutes to listen to my conversation with Wally and, as always, leave your own thoughts on your best survival strategies and practices. Listen Live! Download, Too!




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