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Friday, January 15, 2021

Small Business: Avoiding common business killers

I have had the benefit of a business career that has taken me from Fortune 500 firms to global consulting organizations to the largest nonprofit services organization in the U.S. What I have most has been starting small enterprises and coaching and being a trusted resource to owners of small businesses. Excluding access to capital at the time it is needed, what follows is a short list of common “business killers” I have observed.

1. Business Vision Not Aligned with the Owner-Entrepreneur’s Personal Vision

Many small businesses do not look beyond a year out. Today, long-term business planning for a small business is three years. However, the personal vision of the business owner is what provides the passion and motivation to strive to do something more for the “greater good”: community, family and the employee partners. When the owner feels ready to throw in the towel, it will be the owner’s personal vision that provides the resilience to continue moving forward.

2. Lack of Eventual Business Exit Strategy

Closely-tied to the business owner’s personal vision – and “starting with the end in mind” – many start-ups and business owners don’t reflect on their end-game. All businesses go through one or more of the following transitions: sold, succeed or death.

Why anyone would want their business to die with them after all the work and time invested in it is beyond me; but that is often the outcome of solopreneurs who created a job for themselves. How does the owner plan to exit the business? If it is a family business do they plan to transition it to a family member? If so, is there a staged succession plan? If a partnership, do the partners have clear buy-sell agreements in place?

3. An Organization Not Adequately Focused on Its People

As my Texas Christian University Neeley School of Business friend, Dr. Larry Peters, says in his book, The Simple Truths about Leadership, Turning Your People into Your Partners, “Owners need to understand that they need to make their people their partners in creating their futures … that they need to comprehend the results of an organizational culture that produces engagement, commitment and contribution from all people on the team.”

Unfortunately, many small business owners do not invest the time to create a shared future with their people and visualize how the team will arrive at its destination.

Key steps in determining an organization’s culture is to involve your people in developing the organization’s core values or guiding principles and consistently review with them those already in existence; find ways to recognize team members who have exemplified or demonstrated these values in action; hire new team members around the core values; and onboarding all new staff with a deep understanding of how the organization’s core values work in action.

4. No Good Deed Goes Unpunished

If people fail for reasons beyond their control, owners or leaders who publicly come down on those involved with the failed initiative not only devalue and demotivate that team member or members, but they also send a clear signal to all others in the organization to back away from bringing forward new ideas or innovations that involve taking some risks. Obviously, the smaller the team, the greater the negative impact on morale, output and team member retention.

5. Failing to See Delegation as a Crucial Role in Leadership

Business owners must understand deeply the role in their businesses for which they are uniquely qualified, especially if they start their business from a deep technical or artistic background. After doing so, they must outline the competencies needed for their business and match that with the talent to be hired given the resources available.

Owners must take the time to clarify what is totally in the purview of those new team members and when they must come to the owner for consultation. In not delegating effectively, owners will eventually be overwhelmed, affecting decision-making and problem-solving. Additionally, team members who do not feel fully or adequately utilized and trusted will begin to look for greener pastures and leave.

6. Not Adapting

We all know how quickly our world is changing due to advances in technology. It is easy to rely on what has gotten us to where we are today, especially if we feel ourselves already somewhat successful.

Taking the time to read forward-looking writers and listening to TED talks is great. But, for a small business owner, surrounding oneself with other, non-competing business owners who want to grow their businesses helps the owner get out of the foxhole and gives him or her the confidence to implement needed changes.

7. Not Recognizing the Need to Get Forecasting and Budgeting Down

Most accountants I know are rear-view mirror inclined. And to many business owners, finance is management by checkbook. Owners must understand the likely impact each expense has on both current and future revenue. They must be able to translate a goal into the actions required to achieve that goal, and then estimate the resource requirements needed.

If neither the owner nor the accountant or financial advisor has the skill set and patience to develop a quality forecast, many businesses fail to invest in a fractional CFO because it is seen as another expense. A fractional CFO has the skill set to make visible these connections to construct a sensitivity analysis of sales and expenses to attain the forecasted sales. In turn, the agreed-upon forecast drives the development of an operational budget where “actuals” are monitored and evaluated against the original plan, which can then be modified as needed.

8. Navel Gazing Is the Preferred Form of Receiving Wise Counsel

Some people are blessed in that they have the focus to break out of the day-to-day to make time to work on their business, and not just in their business. Many of us are not.

Many business owners need to break-away regularly to work on their business in an environment that is process-driven, forward-looking, objective, focused on continuous improvement, with a basis in peer accountability.

If you don’t have a peer group of supportive, like-minded business owners who meet regularly in a facilitated work session, talk to those owners who are in such a group to find out more about their business-owner peer group and the people who run or facilitate them, whether it is Vistage, Entrepreneurs Organization (EO), The Alternative Board (TAB) or any other similar organization.

Explore all and find the group that fits your business needs, personal chemistry and budget. This may well be the best business investment you will ever make: A safe-haven to hear and learn from other business owners who have already had that experience or to leverage over 150 years of business experience each month on the issues and opportunities each owner brings to the monthly meeting.

Otherwise, the tendency is gaze at your navel. Last time I looked at mine, the view was rather limited.

Ed Riefenstahl is the Director of Experiential Learning in the TCU Neeley School of Business’ MBA Program. He is a former director in Ernst & Young’s Entrepreneurial Services practice and a Global Alliance Director for KPMG Consulting. He and his spouse, Valerie, founded The Alternative Board in Fort Worth. Riefenstahl voluntarily serves on the board of directors of the Fort Worth BAC Education Foundation. Contact the author at e.riefenstahl @tcu.edu

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