When I started a business in the early 1970s there was no world wide web to find out what the biggest problems were facing small business owners. Like many mom and pop ventures, I did little due diligence. I had an idea, ability, money to buy enough stuff to do the work, and one client willing to pay on time.
There was no insurance agent, attorney for legal formation, CPA for books and tax reporting, or consultant similar to those found in any retail development project. Despite this I succeeded. The reason was dumb luck.
Since I was more of an independent contractor than a business owner, there were no employees. Plus I was working a job simultaneously while building the business. So, without payroll risk, there was little need for capital. In short, my ignorance of working capital didn’t hurt me when demand dried up.
Of course, things are very different now. Starting up the same business today, I would find the Internet replete with bloggers, freelance writers, etc. offering up enough insight to fill up a book on how to solve the biggest challenges facing small businesses.
Moreover, all of this advice is free at the push of a button. So why does small business have a survival rate of only 40 percent and 50 percent for those making it threeand five years out?
One reason is the Internet contains a wealth of information but not necessarily as much wisdom. For example, I came across a blog that described regulation as one of the biggest problems plaguing small business owners today and going forward. To illustrate, the blogger mentioned a company that was getting hit with a huge fine because of recent health care reforms. This company made only $50,000 in profit and the owners hadn’t taken a salary for three years to avoid lay-offs. So the fine would mean cuts would have to occur and certain employees would have to be furloughed.
However, if we apply cause and effect, it is not regulation that is to blame. A business that cannot afford its founders with a sustainable income because operating expenses need to be cut is experiencing business operations risk of producing sufficient gross sales. Arguably, low sales is the real reason this company was unprepared to handle change.
I came across another blogger who proclaimed that fatigue was another big challenge facing small businesses. The author said when fatigue sets in, people working long hours make rash decisions about work, and personal performance gets grinded down.
On the other hand, employee performance can be affected by a company that pays as little as it has to to keep people from quitting. These companies often lack appreciation of personal loyalty, retention, respect, and pride in the workforce.
According to Karl Marx, if work becomes just work, workers become an abstract labor force, and the control over work becomes mainly a management prerogative. For example, if the only goal of a firm is to achieve the highest possible return for stakeholders, and labor becomes a constraint that limits the firm from moving towards this goal, management would decide how to apply resources needed to exploit and break the constraint.
This might include paying less, automation, outsourcing, etc. What it would not include is an investment to elevate employee performance. Investing in employees is the stuff of firms that ascribe to practices of legacy companies that used an older style or system of passing experience and knowledge onto others, including a reputation.
In the final analysis, the Internet is a great place to obtain information quickly but it may miss the mark in terms of wisdom. Like finding good help, there is no substitute for the advice and guidance of trusted advisors who are knowledgeable and have management and ownership experience.
Benefits offered by advisors are business expertise, best practice design, and value engineering that help start-ups and business owners save time and resources by avoiding mistakes.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at email@example.com.