Leadership

Solutions to Common Problems for Small Businesses

December 10, 2012 By Eric Rosenberg 1 Comment

All small business owners have problems. Some of them will only impact certain companies, industries, or geographies. Others are more common. Here are some common problems and solutions for modern entrepreneurs.

Revenue Concentration

Both large and small companies may be faced with revenue concentration. It is a risk that is disclosed on large company financial filings and discussed by investors and business managers all the time. What does it mean? It means too much money comes from a small list of customers.

Why is this a problem? If 40% of your business comes from one client, you will lose 40% of your revenue if that customer leaves. That can completely devastate a small company.

Fix it by bringing in new customers and spreading out your efforts more evenly. If any one customers makes up more than 10%-15% of your revenue, you should look into diversifying a bit more.

Founder Dependence

I have written about founder dependence before on this blog, and it is worth mentioning again. I am dealing with this right now in my flash mob company, where I am trying to bring in help but will lose quality if I do so.

This is a tougher problem to overcome, but it can be done. The key here it to build a team you trust and give them incentives to perform well. Make sure the incentive really encourages the right behavior and you can easily leave your company to a great team when you are ready for that big European vacation.

Balancing Quality and Growth

As your business develops, you will often have to decide where to spend your time. You might be faced with decisions where you will have to decide whether to grow faster or maintain your focus on quality.

This decision is ultimately up to you, but I urge you to lean toward maintaining quality before anything else. Quality and a good experience is what drives repeat business, and that is the lifeblood of most business models.

Don’t scare off customers or develop a bad reputation by slacking on quality for short term gains. Focus on the long haul. Building a business is a marathon, not a sprint. Grow quickly if you can maintain the quality, but don’t give up on what brings your customers back again and again.

Your Challenges?

What are the biggest challenges you face in your business? Have you ever had to deal with any of these, or do your problems come from completely other places? Share your wisdom and experiences in the comments.

Overcoming Founder Dependence

November 13, 2012 By Eric Rosenberg Leave a Comment

As a small business owner, one of the hardest things to do is let go of control. It may be because you care about your business and customers more than your employees. It may be because you see your employees as unable or unmotivated to manage the challenges of operating your company. Whatever the reason, here are some steps to help your business overcome founder dependence.

Train Your Employees

First, you have to train your employees to do everything you do. If you keep everything close to your chest, they would never have the opportunity to take over essential business operations.

Instead of keeping your employees out of parts of the operation, give them opportunities to learn and engage in your company. Teach them to do everything to run the day-to-day operations and important month end operations.

This will not just help you when you want to go on vacation, this will help your business if you ever get sick or have an emergency where you can’t be in the office. If you are not around, you don’t want your business to come to a halt.

Empowerment

Don’t just train your employees to do their jobs and act as a backup for you. Empower them to make the company and workplace better.

Empowered employees are more vested in helping their employer succeed [Journal of the Academy of Marketing Science]. If you can find good ways to empower employees to deal with customer and operational issues, they will work harder for you. Make them feel like their contribution is making a difference.

This will make it more natural for the employees to run the business in your absence.

Incentive Bonuses

If you incentivize your employees for success and good work, they are more motivated to work hard and be responsible when you are gone. Make sure the bonuses are very clear and align with your goals for your employees in your absence. Setup a pay for performance program that models what you want to achieve.

Customer Feedback

When you are around, and particularly when you are not, make sure to get customer feedback. If you are not present and your employees are treating customers poorly or wasting time on your dollar, you want to know about it.

To take it a step further, you can send in a secret shopper to give you extra feedback on your employees and their level of customer service.

How else can you overcome founder dependence?

How to Give Feedback to an Employee – A Model For Feedback

October 25, 2012 By Robert Farrington Leave a Comment

As a leader, it can be incredibly difficult to give feedback to an employee, especially if it is about poor performance. However, on the flip side, if you don’t give the feedback, the employee has little chance of improving their performance. I’ve had to give serious feedback to employees on multiple occasions, even so tough love just this week. Here are a few thoughts on how to best give feedback to an employee.

Performance Feedback

Giving performance feedback to an employee is the toughest thing you can do as a leader, especially if it is negative (but for shy leaders, even positive feedback or recognition can be tough). The most important things you can do when giving performance feedback are:

Be Direct
Be Honest
Cite Specific Examples

Being direct is key. This is hard, but you need to just tell it like it is. Stick to lines like “your performance isn’t meeting expectations” or “this work was unacceptable”. While it sounds harsh, it is necessary. Being vague can leave the employee feeling even more unsure.

You also need to be honest. If their performance is going to lead to termination, say so. If their performance has jeopardized potential advancement opportunities, call it what it is. Honesty will make the employee at least feel like you’re being real with them.

Finally, cite specific examples. ”Performance” is such a general term. If an employee generally wants to improve, they need something concrete to go after. For example, look at the difference between saying “I’m really not happy with your reports” versus “I’m really not happy that you aren’t checking the math in your reports and are using inaccurate calculations”. That way, the employee truly knows what isn’t working, and how they can improve it.

Conduct Feedback

Conduct feedback is a different than performance feedback because there is something much more specific that needs to be improved upon. However, conduct feedback tends to be more awkward than performance feedback because the employee could feel like you’re attacking who they are as a person, not just their work.

The biggest types of conduct feedback that need to be given revolve around: professionalism (swearing, language, etc.), harassment (sexual or non-sexual), or even things like attendance.

Once again, the key is to be straight forward and honest, and let the person know what specific behaviors are inappropriate. For example, don’t just say “you’ve been late to work”, instead, say “you’ve been late on the following days: 10/15/12 by 25 minutes…” This shows the real impact of their actions, not just a generality.

Upward Feedback

Finally, upward feedback is by far the most difficult, but sometimes the most necessary if you want things to improve. Use the same things that you would for performance, but you need to make sure that you’re also being proper. Don’t get animated when giving upward feedback, but always cite real examples. Also, realize that your feedback may be totally ignored – that is the prerogative (although a dumb one).

The Model

In all of these situations, here is a simple model that you can use when giving feedback -

Describe: Describe the problem honestly, citing specific examples.

Elaborate: Explain how this is a problem, and for whom (i.e. the individual, the organization, the customer).

Improvement Required: Tell them how they can improve.

Consequences: Let them know what will happen if they don’t.

Using some of the above examples, here is how the model could play out for performance:

Emily, your performance has not been satisfactory over the last few months. You’ve been late turning in your TPS reports each week, and they have had factual errors. For example, your report from last week used the wrong figure for revenue, making all your calculations incorrect.

Emily, this has a big impact of the company because not having proper accounting can really cause us to lose money and end up having to close.

Going forward, you need to make sure your reports are turned in on time, and they need to be accurate. If you don’t fix this right now, we’re going to have to let you go.

You may think it is very harsh, but it is also very clear on what is wrong, what needs to be improved on, and the consequences of not improving.

Top Reasons People Quit and How To Prevent It!

September 6, 2012 By Robert Farrington 1 Comment

If you’re a manager or run a business, hiring great talent is essential to your success. Having a great employee is a godsend, and you want to make sure that you do everything in your power to keep them on board. As such, here are the top reasons people quit and what you can do as a leader or business owner to prevent it!

Limited Career Advancement

One of the most common reasons people quit is because they feel like they can no longer advance their careers. This feeling usually stems from two places: either the individual doesn’t have the skills to get to the next level, or the hierarchy of the company doesn’t have ways to advance.

For the first one, this has to do with feedback from a manager. You need to ask yourself if anyone has ever spent time developing this person. Can they build the skills needed, and do they even know what they are missing? A little work and investment for success in this person can yield great results.

However, if the company doesn’t have advancement opportunities, this could pose a problem. A good leader should look at why: is it too many people with tenure jamming up the pipeline? Are there poor performers that aren’t being moved out? Has growth slowed and positions are not being created? Some of these issues can be dealt with by management, but other can’t easily be fixed. As such, an open, honest dialogue can be valuable.

Unsatisfied with Pay and Benefits

Another common reason people quit is that they are unsatisfied with pay and benefits. A common misconception is that all employees are disappointed with their pay. This is generally not true. In fact, while most people, when asked, will always want more, most people are satisfied with their pay and benefits.

The most common reason this comes up as an issue is because of fairness of pay, rather than the actual pay itself. Usually, the employee either finds out others are more highly compensated, or another business is compensating employees higher.

As a leader, it is important to retain top talent, and keep them happy, especially when it comes to pay. However, this is a tough one, and you can’t always make it work each time. The best thing you can do is make sure that your pay continues to be competitive to what your competitors are offering their employees.

Lack of Fit to Job

Sometimes, there is a just a general lack of fit to the job. Usually the employee discovers this first, but lackluster performance will soon get the manager’s attention as well. If an employee doesn’t fit in their current job, you should really see if there is a better fit somewhere in the organization. Remember, you did hire this person because you thought there was potential. This is a tough one though, and sometimes it’s best to point the employee in a better direction.

Manager or General Work Environment

This one is way too common, but it is true – your boss makes or breaks whether you want to continue working at a company. The manager has a huge role in keeping employee moral up, and he does it in unsuspecting ways – usually just how he communicates, motivates, and recognizes individuals. Failing in these aspects will lead to employees having poor moral.

Some specific common environmental complaints include:

Poor or lack of communication
No clear understanding of goals
Disrespectful communication
Favoritism
Micro-management
Workloads are too heavy
Poor work-life balance culture

Most of these things are controllable by the direct superior, but some do reflect company cultures as well. If you’re finding or suspecting that employees as a whole aren’t happy working in your organization, you need to start looking at their supervisors or managers, and possibly your company culture. This one may require structural change to address.

Why else do employees quit? What can you do to prevent it?

Why You Should Join a Chamber of Commerce…Probably

August 27, 2012 By Eric Rosenberg 2 Comments

Most everyone has heard of a Chamber of Commerce, but few people actually know what they do and why they should be involved. A Chamber can be incredibly valuable to a new business. Here is what you need to know.

The Basics: What They Do

A Chamber of Commerce is a non-profit organization dedicated to advancing the needs of businesses. Most Chambers are based on specific geographic areas, such as a city, county, or metro area. However, there are some specialized Chambers dedicated to the needs of certain minority groups.

Chambers have several purposes and goals, but all of them revolve around helping businesses and their community.

They act as a government liaison for its members in community issues
They bring together business owners for networking and helps drive potential new customers towards its members
They are not a government organization, but they may lobby a government when in its members best interest
They promote economic development in the region

How Can They Help You

The biggest direct impact a Chamber will have on a member is the facilitation of networking with other local businesses. Through the development of a strong community network, increased business-to-business trade can take place, and that should include you.

Chambers host a variety of networking and community events that give its members a chance to interact with each other or the local community. One local Chamber hosts monthly “business after hours” events where its members can come, for free, to network. It hosts concerts in a park over the summer, where members come together with the larger community.

I have hired a plumber and home inspector in the last year from a Chamber recommendation. Tourists often contact a Chamber looking for things to do and places to stay when visiting a new city or town. Chambers will often refer those tourists to its member businesses.

Indirect Benefits

While you may already unknowingly be reaping the benefits of a local Chamber, it is important to support these non-profit organizations so they can continue to work on your behalf.

Every business in a community benefits from the Chamber, whether they are a member or not. A Chamber has strong connections with local government officials, such as the mayor and city council, and uses that connection to advance the interests of its members, which are all businesses in the community.

Reasons Against Membership

The only real reason I can think of is the cost. Chambers charge members a fee to support their activities, but active members usually get a lot out of it. Depending on the size of your business and the Chamber, membership fees can range from about $100 per year to tens of thousands of dollars per year.

If you are a B2B business, you can make very valuable connections. Sometimes consumer facing companies may get less benefit.