Articles

Work Hard but Fail
by Dr. Lynne Curry

The caller on the phone wanted to hire me but lacked the money. "Maybe you could just suggest a book," he said. "I’m broke but I need to know what not to do next time I start a business. I’ve just worked 80 hours a week for the last two years in my business for nothing. Tomorrow I have to lay off seven employees who won’t believe we can’t afford them. Anyone looking at our revenues would think we’re making money hand over fist when we’re not making a profit. It’s not a pretty picture."

How do small business owners who work hard still fail? How come businesses that appear to be making money go broke? Generally, these owners and businesses step into one of five traps.

Trap 1: The owners work so hard they lose focus. Most entrepreneurs initially work 50 to 80 hours weekly to get their businesses going. Some later manage to switch gears from working 80 hours weekly to a more reasonable 40 to 50.

What happens to entrepreneurs who don’t get their work life under control? They find themselves so busy handling day-to-day concerns that they back-burner major strategic projects or concentrate on work that brings in dollars rather than work that generates thousands of dollars. Exhausted by working without a break they lose perspective and alienate employees or make costly decisions that eat up a year of profits.

What should business owners working way too many hours on low priority tasks do? They need to ask themselves "Am I too exhausted to focus on major decisions and priorities?" If the answer is "yes," these owners need to delegate or eliminate low priority tasks so they maintain the focus they need for major challenges.

Trap 2: Poor financial oversight during rapid expansion. Organizations that grow beyond a certain size and complexity act like balloons forced to expand beyond capacity. As revenues increase so do costs. Because vendors submit invoices before customers pay, cash outflow outpaces revenue or projects outpace the owners ability to estimate costs. The outcome-when the entrepreneur least expects it-the balloon may pop.

Thus a company bids on and wins a million dollar dream project but experiences so many cost overruns they lose $490,000. Or the owner becomes accustomed to late financial reports and misses the early warning signs of a deadly cash flow crunch which arrive late in an overdue profit and loss statement.

Trap 3: Ostrich communications leave too much left unsaid. Because communication normally flows easily in small two and three person companies, owners of growing companies may not learn they need systems for keeping all employees informed about key decisions.

The result? - as the business grows it ceases to work as one company and operates like a three ring circus. Two employees waste time doing the same project. Some employees lose motivation because they feel left out of the loop one time too many. Employees go to war after one promises a customer a project delivered within a time frame so unrealistic it sends another employee into a tailspin.

Trap 4: Expansion overrides ability or systems. Companies that add staff and grow without developing the necessary infrastructure often find themselves running ever more quickly toward a fall. In the same way that many parents discover that two children are three times as challenging as one, many entrepreneurs learn that two or three locations overwhelm the management systems that worked smoothly in a smaller organization. Worse, owners with the skills to effectively manage a staff of two to five learn they don’t know how to create the systems or handle the problems that accompany fifteen to thirty employees.

Trap 5: Money and not customers become the perceived boss. Companies grow quickly because they land new accounts. Initially new entrepreneurs take each account very seriously and do everything they can to meet client needs. After a certain amount of success, some entrepreneurs forget how important clients are and focus on making money rather than on servicing customers. The net result? - burned customers leave, spread the word, and don’t come back.

How do small business owners who work hard still fail? Sometimes they work so hard they don’t look up in time to see the problem coming their way. For others, success brings forth unexpected challenges as when a business’s expansion outpaces the owner’s ability to oversight finances or systems. Sometimes entrepreneurs forget the importance of communications or customers. The good news - you can avoid the traps you see.