As a new business owner, you will be faced with several challenges including lack of family time, financial requirements, employee needs, customer expectations, and supplier concerns.
Initially, you will want to spend every waking moment with the business to help it succeed. This will place stress on your family and may result in resentment. Managing your family’s expectations will require time and perhaps compromise. If you schedule regular time off, your family will know that they are important and your employees will know that you trust them to carry on the business.
A small business may have a large appetite for cash when it is growing. Expansion of inventory may be needed to offer new products to customers, which may mean higher debt to suppliers and to the bank. A carefully crafted business plan should forecast cash needs so that there is no surprise and an orderly draw on credit does not add to your stress.
A small business with a few employees may not have the luxury of back up personnel to fill in when regular employees are off work with illness or vacation. The employees need to help develop the strategy to cover for each other in the event of an emergency. They know which tasks are critical to complete and who can do the tasks. In this way, training gaps can be identified and closed by other employees or the owner. Vacation periods need to be covered with regular employees or part-time workers to minimize any backlog of work for the returning employee.
Customer expectations can be challenging but an astute owner may see opportunities to improve service and build the business. It is unlikely that every expectation can be met but when a trend is noticed, then perhaps an opportunity exists. A careful review of your customers may reveal that 80% of the concerns come from 20% of the customers. While it is difficult to do, can you imagine firing 10% of your worst customers? What sort of impact could that have on the business?
Suppliers concerns often regard payment terms, discounts, and inventory. The supplier’s challenge is to carry sufficient inventory to meet orders without tying up large amounts of working capital. While borrowing costs are low, suppliers may carry sufficient stock, but when interest costs rise, having large volumes of inventory becomes a luxury. Meeting with suppliers on a regular basis to discuss future plans will reinforce your expectations. Seldom will a small business rely on one supplier for key inventory items. Using one alternative supplier will confirm that you are paying a competitive price with your regular supplier.
A small business owner needs to have a mentor to bounce ideas off of. Often an experienced individual could be a good friend or acquaintance who is retired and willing to listen, ask questions, and discuss suggestions. Using the mentor’s perspective, the new owner should arrive at a better decision. Finding a mentor may be challenging; however, it is a huge help to the new business owner. One place to check is the MentorshipBC website where mentors in various geographic areas in BC exist.
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A new entrepreneur will be anxious to make changes in the business to remedy any problems. However, the risk is that changes can have unintended consequences. The idea of firing 10% of your worst customers assumes you know exactly who the worst ones are and you are fine with letting them go. The unintended consequences could include a backlash from other customers, suppliers or employees that reduces the profitability of the business. When changes are being considered it is best to involve as many of the employees as possible to brainstorm other possible solutions to the problem before deciding on a particular path.
When problem solving, it is best to change one item then observe the effects. Changing more than one item precludes the ability to know which item resolved the problem. The same holds true in business. It is a dynamic world with changes happening all the time; knowing which change had what impact may not be discernable. Minimizing the changes helps employees deliver a consistent product as in the example of a franchise.
Being patient with change will give the employees, customers, suppliers, and competitors time to assess your leadership ability and impact on the market. There will be many opportunities to trip up so minimize the risk by minimizing change. However, when the market is changing and you have been able to confirm that, then change is needed. Products which don’t sell this year but had a good season last year are a red flag that needs investigating. Price reductions from competitors may be the reason. Products go out of fashion in some cases. New products are developed that are cheaper, faster, better. Buying samples of competitor’s products is one way to assess the strengths and weaknesses of your products. By developing tools to identify changes, your business can be more proactive than reactive.
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The Merriam-Webster dictionary defines creativity as “the ability to make new things or think of new ideas”. Any employer would be delighted to have a creative staff. However, employees need to be able to try things that fail without being criticized for it. A cautious employee will never suggest something new as the consequence of failure may be termination. In a small business, the risk of creating new things might result in a complete failure of the company. Consider trying out a new idea on a small scale to test it; if successful, it can be expanded, and if not, it can be tweaked or abandoned.
When considering change, the critical aspect is to determine the magnitude of impact a particular change might have before embarking on the change. The old saying “with big risk comes big reward” may be true but could also be stated “with big risk comes big failure.” The business plan may be the ideal tool to try different options before implementing the change.
An example that comes to mind was a forest company that was considering the best way to improve the profitability of the Kraft Pulp product. At one stage, there were nearly 20 options being considered. The choices were all on modeling spreadsheets; however, none were acceptable to management. The final decision was to close that part of the operation and purchase Kraft Pulp from a nearby mill (MacMillan Bloedel Limited, Alberni Pulp & Paper Division).
One tool to develop ideas from employees is brainstorming. A focused discussion dedicated to solving one problem can create a dozen ideas for follow-up and consideration. The employees have to grasp the concept that no idea is right or wrong, only an idea. Often more ideas are generated than expected and you will need to spend more time critically thinking to determine which idea has the most merit. Feedback to the group in a timely matter will reinforce the idea that brainstorming creates ideas and management is considering them.
Another tool is role-playing, where employees take a position and discuss solutions. A customer-service employee who is unfamiliar with the issue may tackle a problem in the shipping area.. New ideas can come from unexpected people and lead to improved techniques.
Personal experiences or memories that people have used to resolve issues may also be fruitful to explore. If someone has experienced a similar issue and resolved it, the same idea may apply to the business.
Developing trust with employees is clearly the best way to raise the level of critical thinking in a small business. Having the confidence that making mistakes is expected before something is perfected will inspire the staff. WD-40 is the classic example of 39 failures before achieving a product that is well accepted today. Accidental discoveries like “post-it-notes” prove that there is room for innovation and creative thinking in every business.
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Another aspect of critical thinking is determining how best to develop backup for key employees. All employees on occasion become sick, need to take vacation, or leave the company. You will need to develop backup personnel to replace key employees from time to time. Developing backup personnel requires a commitment that is challenging for a small business. Training does cost time and money; however, not having trained backup personnel risks relationships with customers and or suppliers, and puts additional pressure on the staff. It is the hidden cost of errors that can outweigh the training savings.
Once your key employee’s coverage is determined, you need to consider your own coverage. Your business needs to run at capacity while you are away. Developing key people to back you up will inspire them to demonstrate their capabilities. Initially, training may include shadowing the owner before taking over for a few days. While employees appreciate the opportunity to fill in and “run the business,” be certain to include appropriate remuneration as they could well be stretched outside their comfort zone. Demonstrating your confidence in your staff will bring major dividends in the future.
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