Writen by Eric Gurr
The explosion of information has led to an explosion of confusion. Confusion as it relates to business is a dangerous thing.
Let's put it out there in plain English.
Business is the creation, selling and delivery of a product or service for a profit.
That's it. Nothing more and nothing less. It doesn't matter if you're running a home based business a small business or IBM, lose focus of the real definition of business and you're going to have problems.
If you're planning on starting a small business or if you're struggling with the business you run today, or if you want to grow your existing business you need to keep this definition at the front of your mind. Everything you do should be based on that one simple sentence. If not, you're not doing business.
So how does this translate in to every day business?
Small business is hard work, tough decisions and a relentless pursuit of the bottom line. When we let our small business become something other than real business, we're inviting failure.
That doesn't mean we become Machiavelli, but we must stick to the truth in front of us, and make decisions based on the facts. We use our brains to resolve problems and when that resolution is telling us we need a change, we make the change. Too often we get caught up in the trap of what's fair. Employee A is often fifteen minutes late, he can be contentious with other employees and is a know it all. He also generates three times the what he costs and is our most profitable employee. Employee B is on time, easy to work with, and a really nice guy. But he doesn't generate any profit for the business and costs the bottom line. Who gets fired? If you said Employee A, or Employee B, both are wrong. In most cases neither gets fired. You rightly keep employee A because he's making the company big money, but employee B keeps his job because it wouldn't be fair to fire him and keep employee A.
Everyone's happy because you're a nice guy. All the employees are content because they think you're a nice guy. What a happy bunch you'll be standing in the unemployment line together. In the company big enough for a human resources department, the HR manager has said we're running an ethical ship and we just need to spend more time developing employee B in to a productive employee. He's just not properly motivated.
Hogwash. It's not our job to find out what color parachute employee B wants. We've given him employment and told him what we expect. The fact that he didn't deliver dictates clearly he didn't keep his end of the bargain. Giving him a second chance with clearer instructions may be warranted, and there's nothing wrong with it. Giving him a pass to be unproductive costs every employee in the company, and costs the owner.
I said business is tough, and it is. An even tougher problem is firing a customer. In small business this can be the most excruciating decision you can make. But sometimes it's necessary. A customer that brings in 30% of your revenue can demand a lot of your time, attention and other resources. You'll have to accommodate. A customer that brings in .05% of your revenue and haggles over the price, pays late, and consumes an inordinate amount of time is not worth your time and doesn't help increase the bottom line. If you've run a small business for more than a year or two you've probably run in to this situation. Every time the phone rings you cringe hoping it's not this customer. But you keep doing business with him hoping for the big hit. But here's the rub, even if you get that big hit, history has shown you it won't be profitable. The customer will eat up your resources and profits at a higher rate.
Another trap that requires discipline and hard choices is dealing with your vendors. I think this is one are that consistently costs businesses money. A bad vendor is accommodated because it's easy, the sales person is really nice, or we don't have the time to find another more qualified vendor. The flip side is the vendor who performs consistently and fairly but the small business owner or manager wrings every cent out of his profits resulting in bad service to himself.
When dealing with vendors the golden rule applies. Treat them as partners who are helping you to grow your business. When the relationship is not helping your bottom line, start to look somewhere else. Vendor relationships should be the easiest part of your business. You can take emotion out of it. Just treat the vendor fairly, pay them promptly, and expect excellent service. When you don't get that, find another one.
Let's summarize. To greatly increase our chances of success in our small business what do we need to do?
Filter every decision through the profit lens. If it's not helping to grow the business, why bother?
Be fair with employees but never reward, or accommodate someone who is costing you money.
Give your sales people the tools they need, give them time to build a client base, and then reward them, or let them go.
Treat your vendors as partners, right up to the point they begin to cost you more money than they make you.
Think long-term. Saving money by cutting costs does not in the long run make you money. No one ever got rich by saving money, you have to earn money first.
Shoulder the burden. You're success in small business is no different than your success in big business. The more stress you can handle, and the better you handle it, the more money you'll make.
Think! The field mouse thinks eating that cheese is a great idea, right up until the point the metal bar comes snapping down on him. Use your head, consider the options and make the decisions that will lead to the long-term growth of your business.
Do business, don't do fads, gimmicks, short cuts or other various nonsense derived by so-called experts intent on increasing their profits before yours.
Eric Gurr is the president and CEO of Intralink. A Cincinnati Ohio based technology/management consulting business since 1994. He is also a contributing editor at http://www.smbresource.com To contact Mr. Gurr via e-mail; egurr@intralinkinc.com
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