A long-held myth is that small businesses are just like big businesses, except with smaller payrolls, lower sales, fewer assets and fewer problems. Those who buy into this myth believe, therefore, that small businesses should play by the same management rules as the big guys.
But that’s mostly B.S. pedaled by people who have never owned or managed a small business. The truth is, small businesses are different.
Typically categorized as companies with 99 paid employees or less, small businesses are not only more vulnerable to market fluctuations and changes to tax rates, interest rates and labour laws, they simply do not have the resources that big businesses can often rely on to weather the storms. And that means they have thinner margins for error.
Work On your Business, Not In It
You’ve heard that phrase before: Work on your business, not in it. In fact, most small business owners need to do both, walking a balance beam between developing strategy and sweeping floors. Whereas big-biz CEOs may employ teams to help with day-to-day business needs, small business owners need to juggle budgeting, HR, payroll, customer service and myriad other tasks.
Now, you may be asking, “What’s the big secret?” When do I get to work on my business? How do I actually get to delegate so I focus on the strategic thinking?”
“The short answer is that it’s a slow, painful, circular process,” says Clemens Rettich. A senior manager of business consulting and technology with Grant Thornton LLP, Rettich has counselled many businesses, small and large, in a variety of sectors, from retail to tech.
“The Japanese have a phrase for it: It takes a thousand raindrops to make an ocean — and it just takes time. It’s an iterative process — what we refer to as the virtuous cycle or circle.”
What that means, he says, “is that you do a little bit of delegation so you can work a little more on the business. If that works, then you free up a few more resources so you can delegate a bit more and get to be a bit more strategic, and so on. It’s not about ‘I’ll delegate a whole bunch so I can immediately become entirely strategic and everything’s going to be roses.’”
Of course, adds Rettich, you can accelerate that process if you can find someone who is prepared to invest in your business, but that comes with its own risks and rewards.
Despite the frustrations of trying to carve out time and resources to work on your business, there is a big advantage to being small. As a small business owner, you’re closer to the front line, which provides deeper insight into your operations. And small business owners often enjoy unique relationships with customers that simply can’t be replicated in larger corporations. That’s huge!
Fast Growth is Mandatory and Good
Spurred on by wild (and rare) stories of entrepreneurs who started tiny and zoomed to the top in no time, small business owners may chase fast growth. After all, it’s tough to stay patient when you’re putting in long hours and constantly feeling cash-strapped.
One of the ways businesses try to accelerate growth is by borrowing, but trying to grow too fast or aggressively can land you with debt that works against you.
“People say there’s good debt and bad debt,” says Rettich. “Good debt is when you’ve developed a great relationship with a lender who’s helped you look at your borrowing based on future sales, continuing contracts or receivables, and there’s a 24- or 36- month runway that makes sense both in terms of the cost of the debt and the money that’s going to come in as a consequence of assuming that debt.”
“Bad debt,” he adds, “is not borrowed on the basis of good support from the lender. It’s personal debt, credit-card debt or line-of-credit debt a bank gives you just because you’ve opened an account or whatever. It’s not well-structured debt that has a tight and intelligent relationship to receivables and future sales pipeline growth.”
Bad debt, says Rettich, is not contributing to growth.
“It’s now corrosive of growth because it’s starting to eat at cash flow in service of the debt.”
Before you borrow, create positive relationships with lenders who have reputations for working well with small businesses. And do your homework. Businesses can be swayed by promises that “we’re a small business bank,” but remember: When dealing with banks, the bottom line matters. Debt will have to be repaid.
For businesses experiencing fast growth that feels uncontrollable, programs like VIATEC’s RevUP may be able to help with common issues like building scalable revenue, ensuring efficient operations and accessing capital.
Every Job Must be Filled
Another issue around growth is thinking you must engage in rapid hiring to keep up. Sure, it’s nice to have someone to answer phones, process invoices and manage people. But don’t be surprised that in the beginning most of those jobs will be done by you, and possibly a small team, off the sides of your desks.
And that’s as it should be because hiring employees is a big deal for small businesses. You want to make sure hiring is absolutely necessary before you take that leap, because once someone is on your payroll, you have a responsibility to pay their wages like clockwork, manage the EI and CPP deductions and abide by labour regulations.
Ingrid Vaughan, human-resources architect and founder of Smart HR, suggests that, before hiring, you do a gap assessment, ideally with the help of an HR consultant who can see the blind spots and offer advice.
Not all gaps are equal, says Vaughan. For example, you may have a huge gap in training and development in an area that isn’t high risk, but if you have a gap in legal and employment standards, that’s an area that could cause you a huge amount of risk. Many employers aren’t aware, for instance, that there’s a legal requirement to do bullying and harassment training.
“It’s actually the law,” says Vaughan, “and if you don’t do it you can get in trouble or fined.”
Once you’ve assessed where the gaps are and which ones are high risk, you can prioritize. Vaughan often works with clients to create three-year, prioritized HR plans that deal with high-risk issues in a timely manner and set out a road map for tackling other issues.
“Then it’s a manageable thing,” she says, “instead of just feeling like ‘I have to do everything and I’m spending all my time doing this and none of my time running a business.’”
You Need to Pay the Big Bucks
Many small businesses think they can’t hire good talent because they can’t pay corporate salaries. But Vaughan says employees are not always driven by big paycheques.
“For today’s employees, especially millennials,” she says, “money isn’t as important to them as a sense of independence, work autonomy and flexibility.
“They would rather be able to work from home sometimes or have flexible hours. That would be more of an attractor than a job that was really rigid but had a higher salary.”
Vaughan also points out that millennials want the ability to do lots of different things and do not like to be pigeonholed.
What better place for employees who like to do lots of things than a small business, where there are lots of things that need doing?
Another big draw is the ability to make a positive difference.
“These days,” says Vaughan, “compensation, benefits and workplace perks pale in comparison to impactful work, opportunities to grow and learn, meaningful feedback, and connection to both the company’s purpose and the people they work with.”
Says Rettich: “Be a business where people want to work, where they can say, ‘I believe I’m part of something really cool here. I’m going to dig deep and give more because I believe I’m going to be a piece of this journey, and down the road there’s going to be something in this for me.’”
And that comes down to workplace culture.
“Does culture matter? The short answer is hell yes,” says Rettich. “It’s a big difference maker when you don’t have the money. A powerful culture will buy you a lot of goodwill from your people and a lot of productivity.”
But culture is not the soft fuzzy thing people think it is, Rettich says.
“Culture is the great equalizer with any size of business. It’s not a happy accident — good culture is thoughtfully built with foundations that consist of safety, belonging, purpose, knowledge and motivation.
“Those five powerful drivers of a healthy culture have to be carefully layered in,” he adds, “as you would in building a machine shop or constructing your finances.”
What kind of business culture draws people in and reduces employee turnover? A businesses that knows the power of appreciation, whether it’s a formal recognition system or something as informal as stocking the fridge with healthy snacks, keeping a few bikes onsite for lunchtime rides, or taking the time to stop in your busy day and personally thank an employee.
“An appreciated employee,” says Vaughan, “is an engaged employee.”
Small Businesses Need to Think Small
Wrong, wrong, wrong. Work with the reality of being a small business, but do dare to dream and think big. Many of the world’s most successful businesses began as tiny ventures, often out of someone’s garage. Famous examples include Apple, Google, Disney and Mattel. Nike began out of the trunk of founder Phil Knight’s Plymouth Valiant. Whole Foods began out of a small store in Texas. Ben & Jerry’s started out in an abandoned gas station.
So set your vision and then take steps to work toward it. And if you decide that your vision is to remain a small business, know that you are part of a movement that is embracing the power of small. An excellent book out this year that offers all kinds of advice for small companies is Company of One: Why Staying Small is the Next Big Thing for Business by Paul Jarvis. While you may have no desire to be a company of just one, Jarvis makes an excellent case for intentionally staying small. His book is also full of advice on how to determine your desired revenue, deal with unexpected crises, keep clients happy and generate ongoing cash flow.
Small Businesses are More Flexible
Are small businesses more flexible than big businesses? Not when it comes to cash flow. In fact, cash flow issues have been the end of many a promising small business. It’s vital to manage your cash flow well, keep your inventory in line with your growth so it doesn’t drain on your cash flow, and collect your receivables on time.
“Receivables feed your business, so be diligent about getting invoices paid,” says Joe Collins, CPA, CA and co-founder of Avalon Accounting. “You need to keep your business alive — you’ve put so much time and energy into what’s gone into that invoice. Don’t let things slide.”
The problem, says Collins, is that while big businesses have accounts receivable people to chase invoices, small business owners may be on their own. If they have a close relationship with a customer, they may feel awkward about trying to collect.
His suggestion? Automate the process. “It takes that hesitation out of the equation,” he says. “Many accounting programs, including QuickBooks and Xero, have a functionality where you put a due date on invoices, schedule to send, and if they’re not paid, [the system] sends a reminder, and another reminder every seven days.”
“Depersonalizing can sound like a bad thing,” Collins adds, “but I know, as a business owner myself, that you need to automate some of these things so you don’t let your ‘unconfident self,’ the one who worries over losing a client, take over. So take that out of the equation and let it go automatically.”
Another reason to stay on top of invoicing? “If an account goes too long without being paid,” says Collins, “your customer tends to devalue your service because the benefit is further removed the more time goes on.”
You’re All Alone In It
Running a small business can feel lonely. While you may not have a team of dozens or hundreds, what you do have is an increasingly robust and welcoming local entrepreneurial ecosystem to draw upon.
Many savvy small business owners team up with other owners to form advisory groups or advisory boards. Advisory groups are ideal for confidentially sharing information with others who may be going through the same issues and seeking solutions.
There are also a huge number of organizations dedicated to helping businesses survive and thrive. Your local chamber of commerce is a great place to begin, as are organizations specific to your industry, such as VIATEC, Innovation Island, Vancouver Island Construction Association, Destination Greater Victoria and Tourism Vancouver Island.
All of these organizations host networking events and most offer educational opportunities for members to learn about industry best practices. Check Eventbrite for business meetups in your area that are appropriate to your business.
Another tip: Keep your eyes open for someone who would be a good mentor for your business. A great mentor is worth their weight in gold and should be someone with extensive experience in your field, a track record of success and who shares your values. Having trouble connecting with a mentor? Try MentorshipBC.ca to get a sense of organizations that specialize in connecting people.
You Can’t Afford to Market
Wrong. So wrong. You can’t afford not to market. Never before has it been so simple to market your own business and to get your message out at a reasonable cost.
The first thing to do is get your brand in order. You don’t have to spend big, but do make sure that you work with a graphic designer to get your company image in good shape. Many independent graphic designers are happy to work with small businesses to build their portfolios. No, they won’t work for free, but new designers often keep their costs in line with the budgets of small businesses.
You may argue that design is an unnecessary expense, but we’re living in a design-centric world where image speaks volumes. Invest in a great logo or wordmark and brand identity.
Next, develop your online presence. WordPress has excellent templates, but if WordPress is beyond your skill set, Wix is a template-driven solution that allows you to easily create, design, manage and develop your web presence. Another solid platform is Squarespace. Shopify is a great platform for businesses with products to sell.
Do keep your website up to date, including location and business hours. It’s usually the first place prospective customers go.
Next, get your social media in gear. You don’t have to be on every platform; choose the one best suited to your business. Are you a retailer with products to feature, or a restaurant owner with photogenic menu items? Instagram is a very visual platform. Facebook is a good all-round platform, while LinkedIn is more suitable to B2B businesses.
Remember, businesses that are most successful at social media understand it’s for conversations, not for simply posting promotional content.
Advertising should also be part of your marketing plan. You want it to be on brand, consistent and compelling. Do research to find out what your target market reads, watches or listens to, then work with a trusted media professional to craft the right advertising plan for your business.
Finally, don’t forget the value of word of mouth that comes with a great reputation built by treating employees, customers and the community like gold. They’ll tell their friends and their friends will tell their friends, and so on.
The main takeaway for any small business: Dream big, work to scale, and don’t be fooled by the B.S.
This article is from the October/November 2019 issue of Douglas.
