The rise and fall of a small business

Approximately 20 years ago a relative passed away and we assumed ownership of a small business he owned.  Even though we received offers from individuals interested in purchasing the business I decided to keep it.  It had a long history in our community, was profitable, and had great employees who wanted to remain.  Like many Americans I had long desired to own my own business, and this looked like the perfect opportunity.  The problem was I had no experience as a business owner nor did I understand the technology of the business.  Due to the experience of our employees I knew the tech part would be covered, and I felt I could learn the nuts and bolts of running a small business.

The first several years it was everything I had hoped it would be.  Sales were good, profits were solid, we were banking money and moving forward very well.  I made management mistakes during that time, but our level of profitability enabled us to cover those. However, when the economy began to weaken our sales slowed down dramatically.  Our clients would have us repair equipment that normally would have been replaced in an effort to protect their finances.  We started going through our savings rather quickly to cover costs.  Year after year we lost money.  I stopped taking a salary hoping that would allow us to survive the economic recession, but no one understood just how deep this recession was at that time or how long it would take to recover.  My inexperience led to more mistakes which cost us more money, money we could no longer afford to lose.  Although I learned from those mistakes they were costly to the business.

Many small businesses have failed during this recession, and most will blame those failures on the economy.  While there may be a measure of truth in that it is also true that many small businesses continue to do well during this downturn.  It is also true that businesses fail during more prosperous times.  It is not the economy that is solely at fault for the failure of small businesses, it is how those businesses are managed during those times that make the difference.  Good economic times will cover up a lot of management mistakes, but slow economic times magnify the mistakes we make in leading our businesses and make those mistakes much more costly to the company.

I learned a lot about leading a small business from the mistakes I made and from resources I began to gather about leadership and small businesses.  Unfortunately, I did not learn them in time to save our company.  It eventually closed.  All the hard assets and our property were sold at auction for pennies on the dollar.  Fortunately, we made enough to pay off all our bills but there was precious little beyond that to show for 15 years of running a small business.  The first few years of owning our business was a dream come true; the last few years was a nightmare trying to find ways to keep it open.  It was an especially painful time for me in many ways.

Coming out of that experience I decided to write a book that would help other small business owners avoid the mistakes I made that could cost them their business.  Because the experience was so recent and painful it did not take a long time to write this particular book, certainly not as long as the other books I've written relating to pastoral ministry.  Mistakes: Avoiding the Wrong Decisions that will Close Your Small Business is available for NOOK devices.  In the book I detail several of the decisions that I made for our company that turned out to be wrong and led to its downfall.  If you avoided even just one of the mistakes I discuss in the book it could save your company thousands of dollars.

Avoid the nightmare of seeing your small business close.  Don't spend sleepless nights wondering if the decisions you need to make are the right ones.  Avoid having to tell long-time employees they no longer have a job due to your closing the company.  Do not live through the horror of watching others drive off with your inventory and equipment after an auction leaving you with bills to pay with no money coming in.  Learn from my mistakes and you may avoid making them yourself. 

How many options are there?

One mindset that often limits our success in any endeavor is to think that we must choose between two options.  As a church leader and as a business owner I would have people ask, "Do you think we should do this or that?" referring to two possible ways of addressing a situation.  Unfortunately, I seldom explored other options and suggested they take one of the options they suggested.  Had we spent more time examining the situation and thinking about other possibilities we may have identified a much better solution.

We need to automatically assume there are more than two solutions to any challenge.  There may not be, but our organizations would often be better served if we at least began with that assumption and spent some time brainstorming what those options might be.  How much better would it be if we could identify seven or eight possible ways to address the issues that challenge us?  We would have a much better chance of identifying the best possible way of dealing with it.

The flip side of this, however, can also be a problem.  We don't want to spend so much time analyzing a situation and pursuing different ways of responding to it that we suffer "analysis paralysis."  If I am on a ship that develops a major leak I am going to do whatever I have to in order to immediately slow down the amount of water coming into the ship.  We can spend time later deciding how to best correct the problem permanently and how to prevent future leaks.  Right now we just to make sure the ship doesn't sink.  If a major event threatens our business we need to throw an immediate fix on it and then take time to study how it happened and determine the best permanent fix.  Fortunately, most of our challenges are not so threatening or immediate, and they allow us the freedom to consider various options before dealing with them.

One of my favorite coaching questions that I use with my clients is, "That's one option; what are some others?"  It's a question you can use to self-coach or to ask members of your team when they come to you with issues.  Refuse to allow yourself to settle for one or two options to any challenge.  Intentionally see if you can find at least ten possible ways to address every issue.  Even if you don't get to ten you'll probably identify more than one or two, and that will make it more likely that you'll find the best solution to your problem.

Home grown leadership

One of the many findings in Jason Jennings' book Think Big, Act Small: How America's Best Performing Companies Keep the Start-up Spirit Alive was that "The companies that do the best job of consistently growing revenues grow their own leaders.  Period!"  They do not hire their top people from outside the company but hire the people from within who have already proven themselves capable and who have bought into the company culture.  Such home-grown talent often results in long-term growth for the company.  Although such growth may be slow it is steady and certainly preferable to the hiring of someone outside the company who comes in with a magical formula that will produce quick results for a quarter or two but in the meantime destroys the culture of the business.  One of the things this means for owners and managers of small businesses is they must constantly be producing quality leaders within their organizations if they want their business to grow.

Jennings studied companies that had double-digit growth in revenues and profits between 1995 and 2005.  What was fascinating to me in reading the book was how each of these companies were doing pretty much the same things such as developing leaders within their organizations.  When someone in the corner office was ready to retire they already had people in the pipeline to replace them.  When the company was ready to expand and open new stores they had people ready to manage them.  There was little concern about whether or not this person would fit in with the company's culture because they had already been operating within that culture for a number of years.  There was also little doubt they could handle the position they were being offered because they had been groomed for that position and had already proven they were ready for it.

The book shares a number of ways a business can identify and develop future leaders, but we'll only address two of them in this post.  Once an individual has been identified as a potential future leader it is essential that this person is constantly evaluated and coached.  He or she must be given broad responsibilities and cross-trained in various aspects of the business followed by regular evaluations and coaching.  An annual performance review isn't enough.  It's also not enough to just evaluate performance.  Attitudes and behaviors must also be looked at.  A business committed to integrity will be just as focused on the values of the potential leader as it will on his or her results.

A second thing businesses must do if they want to successfully grow talent is to make people want to stay.  Many businesses talk about how they value their team members but actually treat them as commodities and not people.  It's very hard to raise talent from within a business if it has high employee turn-over.  If a business wants people to stay they must show by their actions how they value those individuals.  The business must help their team members become excited about the growth and long-term prospects of the company and be shown how they can benefit from that growth.  Jennings illustrates in his book how several of the companies he studied does that, and the actions these companies took are doable for most small businesses.

Few things a leader does is more important than identifying and developing future leaders for the business.  It takes a commitment of time and resources, but when it's done right it will pay huge benefits in the future.

The right mindset for a small business owner

I recently finished a powerful book written by Rabbi Daniel Lapin called Thou Shall Prosper: Ten Commandments for Making Money.  Lapin is an Orthodox Jewish rabbi who has spent many years studying the qualities that have made Jewish people excel in business, and he has written this book to make these principles available to everyone regardless of their faith tradition.  As a Christian minister I found his insights into some of the Old Testament texts illuminating, and as a business person I found his application of those texts inspiring. 

Thanks to recent events business owners and successful people have often been painted as greedy, dishonest people who cheat and lie to rob poor people of their possessions.  Watch almost any program on television, any movie that depicts business owners, or watch the national news and see how many times business people are portrayed in that light.  The idea of an honorable wealthy business person is foreign to most people's thinking.  This false mindset of business people has even made some successful people feel guilty for their success.

Lapin writes that every dollar that is earned is a "certificate of appreciation" from one's customers.  This is true whether one works on a factory assembly line, owns a small mom-and-pop business on main street in a small town, or is a CEO of a large multi-national organization.  Everyone who earns a living has a customer, and the money that is earned is the result of satisfying that customer.  Lapin writes, "If you did not rob or steal from anyone to obtain that dollar, if you neither defrauded anyone nor persuaded your government to seize it from a fellow citizen and give it to you, then you could only have obtained that dollar in one other way - you must have pleased someone else."  There is nothing shameful about that nor is there any reason to feel guilty because you have become successful.

This is the mindset we need to instill in people, not the negative ones that attempt to demean business leaders and other wealthy individuals.  You need to understand this blog is not written by a wealthy person.  I am the typical middle-class American who has worked hard all his life to join the middle class, but I appreciate wealthy businesspeople.  No poor person ever gave me a job that allowed me to provide for my family.   When we seek gifts for charities and other worthwhile endeavors do we ask the poor or the wealthy for those funds?  Studies find that the wealthy give vast sums of money to charities, their churches, and other worthwhile needs.  Business owners give to their communities, to their churches, to other endeavors.  They provide employment that allows people to earn an honest living and support their families.  They provide goods and services that people need.  Lapin assures us there is dignity in business for all these reasons and more.

The book provides 10 commandments for making money, but it is not a "get rich quick" book.  It explores centuries of the Jewish mindset regarding money and business based upon teachings from the Bible and the "Oral Torah."  Lapin writes, "Deep within traditional Jewish culture lies the conviction that the only real way to achieve wealth is to attend diligently to the needs of others and to conduct oneself in an honorable and trustworthy fashion."  The 10 commandments found in the book help flesh out aspects of that conviction.

I appreciated the book and recommend it for several reasons.  One, it reminds the reader that honest businesspeople should be honored and respected for their contributions to our society.  Secondly, it gives interesting insights into Jewish beliefs and customs, and, thirdly, it presents some foundational concepts that one needs to believe in if he or she is to enjoy financial success.

Indecision will cripple your business

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Every day leaders are confronted with a variety of decisions they have to make.  Hopefully, your employees have been trained and are empowered to make many of the decisions that need to be made, but there will be those decisions that only you as the owner or manager can make.  The most successful leaders will not postpone making those decisions.  A study conducted by the Harvard Business School once asked "What are the top characteristics of high achievers?"  The persons being asked gave a wide variety of answers, but the top response was the ability to act quickly.  They recognized that leaders who can make quick decisions and act on those decisions were going to be the most successful in their fields.  Those who procrastinate in making the tough decisions would enjoy much less success.

This does not mean that these quick decisions were always the correct ones.  Sometimes these decisions were not the best that could have been made, and occasionally they were completely wrong.  But, the decisions led to actions, and if the actions didn't produce the desired results then new decisions could be made.  In either case, the best solution would be discovered more quickly through not putting off making a tough decision.

These decisions were also not made without input.  Leaders know to acquire as much information as possible before making an important decision, but not to delay that decision until they have every iota of information that might impact the decision.  Leaders never have all the information they need, but they often can't wait until that information is available before making a decision.  If new information becomes available later that would lead to a different decision then the initial decision can be altered.  I once sat in on a meeting when a question was raised about a decision that had been made by a board two years earlier.  One person in the room reminded everyone in the room of the earlier decision when another person responded that decisions can be changed when new information became available.  Few decisions should be written in stone.  Especially in the times in which we now live, decisions made two years earlier should not be seen as Gospel.  They may have been the right decision at the time, but as new information becomes available or things change, then those decisions need to be examined and changed if needed.

When leaders refuse to make necessary decisions they create doubt in the minds of their team members.  These team members wonder who is running the organization and what will happen if their leaders become incapable of making important decisions.  There is a great scene in one of the Pirates of the Caribbean films when, near the end of the movie, two pirate ships go on either side of a British ship and begin firing.  Throughout the movie the commander of the British ship was arrogant in his leadership, but as these pirate ships made a maneuver he never expected he suddenly became frozen and incapable of responding.  The subordinate officer kept demanding an order which never came until the subordinate office assumed control and ordered the men to abandon ship.  The pirate ships kept firing on the British ship as the commander slowly walked across his ship until it finally blew up and sank taking the commander with it.

In business we will always have pirates firing at us.  People will do things we never expected.  New challenges will continually confront us.  Some of these challenges will offer opportunities for our businesses to grow; others will threaten to sink us if we do not react quickly.  In either case, decisions will have to be made, and you as the leader will be responsible for making them.

Network to build your business

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A few years ago a friend asked me to speak to the local Rotary Club about the auction business I had recently started.  My schedule was clear that evening so I agreed.  Despite bad weather a nice group of people were there representing various businesses in our community.  I kept my presentation to about 20 minutes, but I was surprised by their questions that lasted about 30 more minutes.  There was much about the auction business they did not know which led to some very good questions about the details that are involved in having an auction.  It was a great opportunity to showcase my knowledge and my desire to operate a quality auction business that will treat people with respect.  It was also a chance to build relationships with persons I had never met before.  We ate together, we laughed and joked with one another, and by the end of the evening I think we all felt very comfortable with each other. 

The day after that meeting I thought back to the fifteen years I owned a previous business.  Not once did I ever speak to any group about our business nor did I ever join any of the organizations in our community.  We sat back waiting for people to walk into our business, ran an occasional newspaper ad or radio spot, and depended on word-of-mouth advertising from satisfied customers.  I have to wonder how much better could we have done if I had networked with other leaders in our community so they could get to know me on a personal level and get to know more about our company.

Given the option, people will do business with persons they know and trust.  Networking allows others to get to know you on a more personal level.  Networking is more than working a room and passing out business cards; it's about getting to know people and letting them know you.  It's building personal relationships with other people.  It's about building top-of-mind-awareness through relationships.

Are you a member of any of the local service organizations in your community?  Don't misunderstand...you don't join these groups just to get business for your company.  You join to help make a difference in people's lives.  Many of these groups do some great work in their communities, and that is why you want to be a part of that.  However, as you serve alongside others in the organization you are building relationships that may well result in increased business.  Anyway you look at it, that is a win-win situation.  You benefit from the increased business, and your community benefits by your involvement in the organization.

What would you do if someone asked you to present a talk to one of the groups in your community?  For many people, their number one fear in life is to have to stand before a group of people and give a talk.  I've been in ministry for over 35 years so that is not a fear of mine, but I have seen people freeze when they've been asked to speak to a group.  As a business leader you need to conquer that fear because such opportunities are a great way to network with other people and present information about your business they may not have known.  It puts a human face and story on your company that is more appealing than any logo or slogan.

Look for networking opportunities.  I think you'll find they will help grow your business.

To learn about other mistakes I made in my previous business be sure to read my e-book Mistakes: Avoiding the Wrong Decisions That Will Close Your Small Business.

Your online presence needs to be updated regularly

I scan or read well over three dozen blogs each day.  The posts that I find helpful I put on Twitter so others can be directed to the author's site so they can read them if they want to.  One of the things I don't understand is why the people who create these blogs may go for months without ever adding a new message.  Recently, I removed several of the blogs I had been following because nothing new had been published on them in five to six months.  Many of these were business-related blogs that I assume were created to attract people to those businesses.  I don't think most people will find them very attractive.

Since starting this blog a few months ago I try to post on it at least once a week, usually Monday.  Once in awhile I don't do it simply because of my schedule.  I have another blog that is focused on ministry and church leadership.  Because that is my primary focus and the field in which my day job is located I try to post on that blog at least four times a week.  In addition, I post around 15 articles on my Twitter account each business day with a link that directs the reader to the site where they will find the article.  Half of those articles are related to ministry and the other half are focused on small business.  I do this because I want my readers to find fresh information from some of the best thinkers in these two areas of life.  Since my Twitter account links to my Facebook account, those who just follow me on FB are able to be directed to those articles as well.  I continue to struggle getting large numbers of people following my posts; I can't imagine how difficult it is for those blogs that are only updated 3-4 times a year to attract regular followers.

What makes this even sadder is that I have found the articles on these blogs to be quite good.  The authors are people who have something worthwhile to say, and usually a product or service to market, but they are turning away some of their potential clients due to the lack of blog maintenance.

Small businesses and ministries need a presence on social media.  A web site and/or blog (I think both are best.) are becoming more essential to get their messages out to persons who need to know about them.  But, if these are not going to be updated regularly these sites can become more of a detriment than an asset.  Stale messages send a negative signal to your potential clients that you don't want to send.  It tells people that you don't have a lot to say about your product or service or you just don't care to give them the information they might need to do business with you.

I have seen church websites that have not been updated in three or four years.  Their previous pastor is still listed on the church staff page.  If that information is wrong then I can't assume I can trust their service times either.  This has actually kept me from visiting some churches.  Some businesses don't do much better.  Dated information about the company or the product or service doesn't impress potential clients, and it's important to know that the first image some people will make about your company will come from you social media sites.  Create the wrong impression online and you will drive potential business to your competitors.

Businesses have two options.  Either pay someone to manage your site or do it in-house, but your sites must be maintained and updated on a regular basis.  In today's environment your online presence may be a major portion of your marketing depending on the target audience you are going for.  As such, it should be seen as an investment, not an expense.  You are investing money and time in an effort to reach new clients and to encourage your current clientele to do more business with you.  Make your online sites a priority in your planning.  Don't ignore or "forget" them.  They can be a rich source of revenue if they are properly maintained.