Getting Small Businesses the Help they NEED!

In my previous blog I spoke about the need for people who operate one or two man businesses to find the resources they need to develop their businesses without having to incur huge costs that they can ill afford.

Talking about cost, I guess we need to quantify what we mean. Let suppose that you are operating a one man business where YOU do everything, from making the product, to delivering it, invoicing it, collecting the money, buying the stock, advertising, marketing, planning not to mention keeping the accounts or cleaning the loo’s!

It is no wonder that nothing ever gets done very well. It is no wonder that your product is not perhaps quite as good as that of your bigger competition! It is no wonder that you sometimes deliver late, after all you have to have a holiday, or your wife or child is sick, or the car breaks down, or the VAT inspector calls! These are all valid reasons, but what does your customer or clients really think?

If you use a book keeper to do your weekly invoices then you will probably be paying around £10 to £15 per hours for a reasonably competent person. If you are using an accountant for your quarterly accounts (you do produce them don’t you?) then you’re probably talking about £20 to £30 per hour depending upon the quality of service being offered. If you use a marketing consultant, then you’ll be paying many hundreds of pounds each month, and graphic designers don’t come cheap either.

Now it has been said that in the UK if a ‘small’ business is to succeed then it needs to make at least £3,000 per month profit after costs and before the owners take their share. That’s not a lot by any means. But whatever it is you need to ensure you have enough funds to grow and improve your business month on month.

How many people do you know who started out a new business when they left their previous employment and were reasonably successful for the first year or two? Perhaps they picked up their main client from their previous employer? Then things start to get tough and eventually the business falters and may be even fails.

Every business needs to grow. It costs money to grow a business. Many small business owners today rely on networking to achieve that growth. They spend time each week attending local networking events and meeting people, always hopeful that they will find a new customer or client. As many of you know, when that happens that person disappears for weeks or even months as they work with their new client. Eventually they return, looking for work again.

Of course, as most of us know, nearly everyone attending those meetings is looking for work because times are thin for them. They are not out to buy anything, rather they are focussed on finding more business. Sadly the truth is even worse than that. A large number of these people are networking because they believe that is a cheap way to market their services. They have little hope of finding any business but keep kidding themselves they are investing in marketing.

We have all heard about the success of the local golf club. That is where lots of business is conducted. But that is just another networking meeting you might argue.

No it is not!

You see the local golf club is the place that successful business owners go to relax and enjoy themselves with a relaxing game of golf. They can afford to do that because their businesses are not reliant on them and they are making a reasonable profit. Put a couple of dozen successful business owners together and they will enjoy their golf and also do business together. They need outside resources and they can afford them.

For the rest of those small businesses, the owners do not have time for golf and probably could not afford the fees anyway. Sadly that is true of the vast majority of small business owners.

So what could they do to improve their situation? Is there something that they are missing? How can they find the resources they need? How can they fund them? And how can they find new clients and business?

Well there are ways … and there are new ways becoming available soon.

What DO Small Businesses Really Need?

There is a good chance that if you are reading this that you own or run a small business employing just yourself, maybe your life partner and perhaps one or two other people. That is a typical profile of the vast majority of businesses in the UK. Even more so in many other countries.

In my experience, as I have networked around hundreds of business meetings and groups over the last five years or so, most small businesses suffer from one major problem. And that is being small! They do not have the resources to maximise what they do.

If we look at a larger business, say one employing 500 members of staff. The business will be run by the CEO, supported by a team of directors and under them a team of managers. They will also spend a proportion of their income in bring in outside resources to provide them with the knowledge and skills that they do not have.

Few companies will have their own lawyer or specialist management consultants. Most will bring in the expertise they require for Health & Safety, Employment Law, Legal activities, IP protection, Insurance requirements etc. If a large company cannot justify employing the expertise it requires it will outsource that requirement. Of course all this has a cost, often quite high but absolutely essential for the business.

At no stage does the CEO know everything! He or she will have a good understanding of most business principles but then rely on a specialist to interpret those principles for the benefit of the business. If that was not so, why ever have a board of directors? Why ever have a management team?

When we look at a small business all the expertise will usually come from the business owner. Because investing in specialist help is so expensive they will probably not venture down that route, perhaps instead taking free advice, reading articles or books on the subject or even worse, pretending they have the answer and blindly going forward.

The logical conclusion is that the smaller the business, the more the owner needs to know or the more they need to spend on getting their answers.

As the majority of ‘small’ businesses only employ one or two people, the cost of bringing in that outside expertise is proportionally very high. Many of these companies barely earn enough to pay the salary bill let alone spend out thousands on specialist help.

Of course the irony of this situation is that those ‘small’ businesses will remain small and have little or no chance of ever growing very much. The large competition is so great today that the proverbial ‘rat race’ ensures that the big boys remain in the lead and the rest follow behind.

Michael E. Gerber in his book “The E-Myth Revisited” tells us that one of the main reasons why small businesses fail is that the owner who is normally an expert in their own field, fails to understand that running a business requires all the other expertises as well. You may be a talented engineer, software developer, graphic artist, chemist or chef but that does not mean that you can ignore finance, marketing, sales, HR, health & safety or indeed ignore such things as business insurance, taxation, accounts or product delivery. Indeed the smaller business carries a higher level of risk. If the owner of a one or two man business is ill, who looks after the shop? Who cooks the pies? Who delivers the goods?

Now over the years, governments have realised these problem and have created many centrally backed organisations such as Business Link and other development agencies who offer help and assistance in these areas. Sadly, in many cases the level of expertise is limited, and the willingness of such organisations to help is restricted because their skills and time are spread across such a large number of businesses.

So the conclusion must be that nearly all small businesses need to find the expertise they require if they are to grow successful into large and more mature companies. The predicament is simply how to find that expertise at a cost that can be afforded.

Well there is an answer … but can it be made to work?

More about Mentor Power (http://www.mentor-power.org) in my next posting!