The Employee Scenarios DefinedSeveral events recently occurred with client businesses that made me take a step back and really try to understand a why small business owner makes some of the decisions that they do! For nearly a year I have been advising one client to put better employee systems in place. Well, it’s finally hit the fan! A key employee left for more money after another employee had some health issues. Now everything has nearly come to a screeching halt as a result. In another case, while assisting a client to determine the size their company needed to grow in order to get to the business to a self-sustaining state the client said "revenue has been beyond this level before." His heart sank . He realized he had been where he needed, but he did not make business self-sustainability an objective. As a result, he didn't make the right hires to free himself from the business. So, he has to do it all over again! You probably think you see the flaws in both scenarios. But, do you really understand the psychology that caused these outcomes? This takes a little deeper look in the mind of a small business owner.
The Psychology of Small Business Owner Bad DecisionsFirst you must understand the root-cause in both these scenarios. The small business owners made the same mistake in both situations. They approached their business as an "paycheck" (small business owner mentality). They should approach their business as an "income generating asset." It should generate wealth for the small business owner's family, and provide paychecks for their employees (entrepreneurial mentality)! Instead, the small business owner just looks at their business as a paycheck. And as a secondary objective, making some extra money (profit) if they're lucky. When they should be looking at their business like an investment that could continue generating income for them. THIS IS NOT A GOOD DECISION!! Now, I know what many of small business owners will say, “Dino, I love what I do. I never want to retire!” I didn’t say you had to retire. I said, build your business like an asset!!! It should be capable of paying you and your family whether you’re there or not! That means your business is a cash flow machine by itself (business self-sustainability), NOT a job that you come to work at every day so you can create the cash flow!!!
Why Does the Small Business Owner Mentality Exists?The reason most small business owners don’t think this way is because nobody ever told them they could build a small business that way! Most small business owners probably start out by getting tactical advice from someone they know that owns a business. The problem is that most of these other small business owners really just own their own job too. So, the new owner is getting bad advice from the wrong resource! Most small business owners don’t start thinking like an entrepreneur until it’s too late. This is usually one day when they’ve finally decided they’ve had enough and don’t want to go to their job anymore. The problem is one we address in our eBook "The Missing Component to Successful Entrepreneurship”. What small business owners end up building is just a job. It has no real value. So, they can't sell it because it's even harder to find someone to BUY THEIR JOB! If they're lucky they might find someone like me or Business Growth Simplified. They'll tell them, "it take 3 - 5 years to get their business where they need it to sell! But, when you build a self-sustaining business everything doesn’t rely on you. So, you don't have to come to a job every day any more. When problems rear their ugly head, it’s not as big an impact for you. You don’t have to drop everything in order to handle the problem. If you are the business, then when you drop everything your cash flow stops while you handle the problems. Also, if you build your business for self-sustainability, when you have finally had enough then you can sell the business because it has real value. So, you can really retire. Or better yet, if it’s already supplying you enough money to retire, and you don’t have to be there to run the business, why would you want to sell such a great investment? Bet you hadn’t thought about it that way before!!! Most of our DE, Inc. clients are building toward this second scenario. Subscribe to one of our memberships if you want to grow a self-sustaining business and turn your business into an on-going income stream and legacy for you and your family!
Not Ready for a Membership Yet?Why not at least stop thinking like a small business owner and start thinking more like an entrepreneur. Just complete the form below to get a FREE copy of our e-book The Missing Component to Successful Entrepreneurship”.
Before You Begin Low Cost Marketing
- What is you vision 3 – 5 years into the future?
- How do you plan to exit your business? (Just close it down, sell it to a buyer or employee, leave it to your children, etc.)
- What do you want to accomplish this year to begin the journey? (This is an annual goal with a revenue target)
- What key factors must you accomplish to meet that goal?
4 factors in each category that impact a small business’ growth:
- Owner Goals
- Operational Skills
- Managerial Abilities
- Strategic Thinking
Management Growth Factors:
- Financial Assets
- Personnel Resources
- Business Assets
The first step is getting from the Foundation stage to the Survival stage. Here are the requirements on which you must focus under each of the previous categories if you wish to successfully achieve the “survival” stage of growth in your business:
- Profitability: it is critical that the owner set a profit goal for the company to plan from and strive to achieve.
- Owner still controls ops or sales and may have 1 key manager in the other function.
- The owner must begin to delegate, however strong direction and control still exist with the owner.
- Trial and error as a management style still continues.
- Owners financial abilities must evolve and begin concentrating on cash flow forecasting.
- Formal planning is cash forecasting
- Cash begins taking the pressure off from the existence stage
- Credit is still difficult to come by alternative lending sources are required.
- owner, friends, family
- government grants
Management Growth Factors
- “Big Dogs” may emerge—loyal high-producers who build the business exponentially in this time of rapid first-stage growth
- Simple organization structure typically exists
- Systems are minimal with evolution & implementation in early stages.
- System focus at this stage indicates high probability for success in future stages of growth.
- Begin to establish a market
- Assets may begin to increase if owner is “asset-aware”
- Right business model could make business salable
To create company systems that will consistently and predicatively produce profitability.If that seems like a big task, it is. But, the objectives are very clearly defined. Just follow the directions provide in the Small Business Growth Matrix! If you’d like a further explanation of where to focus in the survival stage read the post 8 Things You Can Do to Achieve the “Survival” Stage of Small Business Growth. Notice most of the objectives center on getting yourself untangled from the day-to-day business. What I often find isn’t that the systems don’t exist. They’re just not formalized and the owner doesn’t feel comfortable letting go and delegating. Notice the problem here isn’t a business/company factor. The business stuff is easy. Write the process down. Teach someone else to do it. And, turn it over to them from this point forward and monitor it through some form of regular reporting. Easy enough, right? Sure, until you add the emotional attachment many owners have to their business. Often the business is a source of their self-identity! Now making the necessary company changes is not so easy! It has taken decades to master the skill of being able to assist a business owner through this transition. I can tell you having assisted in dozens of cases it can take years to get them to this point. Some owners never make it. Usually this is because they can never get past the business as being their identity. They never seem to define a strong enough personal goal to motivate them to make the personal change. Do you have the have the personal goal that will allow you to get to the other side, or you’ll struggle until it becomes a crisis? Our personal and business goal assessment is a tool I have specifically designed to assist with this process. If you don’t have a powerful enough motivation yet I would highly recommend that you check out this tool. So, if you have the motivation to change personally, and you have the roadmap of what objectives you need to achieve to get there, what else do you need to get started? For those that have made it to the other side of survival, what help you get across the chasm?
Consistently achieve owner established profit requirements.With this in mind what should your sales objectives be and what can you do to begin creating sustainability within your sales operation? Notice the emphasis on sustainability here. The small businesses that get stuck in no man’s land get stuck there because they haven’t established growth through the survival stage with an eye toward sustainability. Here are some objectives that will help you move through the survival stage without getting stuck!