Stop thinking and acting like a small business because you will run and get paid like a small business.
Quote of the Week:
“You can’t do today’s job with yesterday’s methods and be in business tomorrow.” -Unknown
The Problem with Thinking Like a Small Business
I love the idea of small businesses. However, lately I have heard so many radio commercials by small business owners who sound like they are begging for business: “Thank the good Lord we’ve been in business for so many years. We are just grateful to be opening our doors. We are going to treat you like family.” Sound familiar? I understand having gratitude for your business and having your business confidence in a faith-based background, but I don’t ever want to sound pathetic or like I am lucky to open my doors every day. What ends up happening is that you run your business to survive. This is the biggest problem with small businesses and why you need to stop thinking like a small business. If you want to have a profitable company that you are excited about running and growing, you have to start thinking like a big business. Here are seven problems that result from thinking like a small business.
- Hiring Friends and Family
When I go to my family reunions, I don’t see a huge talent pool that I want running my businesses or working in my businesses. That is the reality. I want high achievers or the one in ten staff members. It is difficult to believe that all of a small business owner’s family members just happen to have key positions within their company. They typically hire them because they don’t hire anyone else and they are in default positions. In many of the businesses I have worked with, I have seen the daughter answering the phone or the wife doing the books. When I ask the owners how they are doing with retention or finances they have no idea. They are running an average business with their family as their staff and are just trying to get by.
The biggest issue with hiring friends and family is that you have a LOT problem or a Lack Of Talent. To be a great business you need to have many talented people on your staff. I’m not criticizing my family members, but if I had to hire ten sharp people from my last family reunion I would not have the companies that I have now because I need people with certain skill sets and certain industry understandings. You need to hire the best people, not just people you can hire because they are available such as friends and family members.
- Treating Customers Like Family
The problem with treating customers like family is that you tend to be paid like family and you know what that is like; you get little or nothing. If you have that kind of mindset, people will unfortunately take you for granted. They are never going to pay you like a big business or a reputable high-end business. Customers will think of you like this: “I know this good old boy down the road. He is grateful for the business and his prices are really low.” I think we should treat people the way we would like to be treated. However, if you treat your customers like family you will be paid like family. Every time I tried to get paid by my family I never got as much as I did from a regular client.
- Having a Survival Mentality
Many small businesses are just glad to open their doors. At the end of every closing they say, “Another year. We did it again.” You want to have a competitive mentality, not a survival mentality. When he took over the CEO position at General Electric, Jack Welch said that, “If we can’t be number one or two in each industry we are in then we don’t want to be in it.” That is a competitive mentality. Small businesses need to start setting some high goals and have a competitive mentality.
- Having One Bank Account
This practice does not lend itself to good fiduciary responsibility. You need to have reserve accounts, an account to pay down debt, and an account to grow the company. It is not a good idea to be treating your business’s finances like a general household fund. I have often seen small businesses that have one checking account with an overdraft. This one number controls the entire outlook of the company. I encourage multiple accounts in businesses for many reasons.
- Not Having a System in Place
This problem is a result of having a lack of talent. Because you have friends and family running key departments you don’t know how they are running them. Because you don’t want to step on anyone’s toes you let them continue to run their departments the way they are. The problem with this is that unless you are going to sell your business to one of your family members or friends you can’t sell your business to anyone else. There are no systems in place or processes by which you operate. I encourage you to run your business in such a way that if you had to leave for 90 days your business could run without you. In order to do that you need to have both talent and systems. Try to cultivate the franchise mentality (think Mcdonald’s or Domino’s). You need to have systems in place which can not happen if you have a lack of talent or you have staff members that you can’t confront or challenge to do more.
- Being a “Word of Mouth” Business
You will not survive if you are purely a word of mouth business. Word of mouth customers account for a third of your business. I have been tracking this statistic for twenty years over all the companies I have ever owned. We have an A+ rating with the Better Business Bureau and we have won every award within our area. That being said, one-third of our customers come from repeat, one third come from referrals and 40% of new business we have to attract. This must be accurate because Microsoft, who have the only office systems that people actually use, advertise like crazy every time they launch a new windows application. Apple still advertises everytime they launch a new phone and Budweiser advertises their beer. Even your largest companies still advertise. They still want to attract new customers, protect their market share and introduce new products.
- Having a Week to Week Mentality
Many small businesses don’t set goals or have a vision for the company. They have a survival mentality instead of forward thinking. Stop thinking about only making it through the week and start thinking quarterly, yearly and five years down the road. The reason why small businesses do this is because they have a lack of talent and they can’t even achieve these long-term goals.