Top 12 Mistakes Made By SME Business Owners.

Those of us who provide advice and guidance to SME business owners frequently observe dysfunctional behaviors by clients or prospects during the meet-and-greet and business analysis phases of an engagement. So what are the most common mistakes and how do they impact a business?

  1. Failing to plan properly for the future
  2. Running after every opportunity they see
  3. Trying to do everything themselves
  4. Hiring people in their own image
  5. Micro-managing
  6. Losing sight of the big picture due to focusing on minutiae
  7. Making decisions on instinct alone
  8. Business owners assuming they have all the answers
  9. Bringing in family members to hold key positions in the business
  10. Frequently changing direction of the business
  11. Giving mixed messages to employees
  12. Spending working capital on fixed assets

Failing To Plan Properly For The Future
Many, but not all, SME business owners simply do not see the value in business planning. Their approach to business tends to be short-term and immediate. It is often said that failing to plan is akin to planning to fail. It is imperative that any business takes the time to look ahead, creates some meaningful goals and objectives, and maps out the journey that will allow the business to achieve those objectives. Even taking a 90-day view forward, and executing the 90-day plan effectively, can transform the performance of any business.

Running After Every Opportunity They See
Some clients may have a razor sharp focus in their business strategy and know exactly what they are trying to achieve. They display clarity and purpose around their choice of product set. However, there are other clients who see opportunities everywhere they look, and before you know it, they are racing off to seize these opportunities, no matter how tenuous or ill-fitting they might be for their existing business or their skillset. This is typical of entrepreneurs, which I call “starters”. Starters are forever seeking new opportunities but they do not have the resources or staying power to finish properly. Unfortunately, this kind of strategic and tactical error eats up scarce resources and may leave the core business floundering.

Trying To Do Everything Themselves
Many entrepreneurial businesses start with the owner managers doing everything themselves. However, to create tangible value and to maximize the use of their time, they should be focusing 95% of their time on activities, which add value to the business and to their customers. All low value activities should be delegated to other employees (if any) or outsourced (where possible). The real challenge for owner managers is knowing when to stop doing it all themselves and instead, taking the decision to hire some help.

Hiring People In Their Own Image
It may take some time for SME business owners to realize that they need some help, but most eventually see the stranglehold they have on their businesses and make the decision to hire employees. We all tend to like people that are quite like us but this can be a mistake when hiring. Real value comes from having diversity of skills amongst your employees, but linked by a common culture and set of values. The trick for SME business owners is to avoid hiring lookalikes and to focus on building a team of people that cover all the bases, while each one individually spends 95% of their time in areas where they excel. Don’t make the mistake of spending training dollars to get employees to get better at tasks that they are not good at and which they don’t like doing.

Micro-Managing
Business owners or managers that spend all of their time watching over the shoulders of employees have a really special form of insanity. Yes, it is nuts. The whole purpose of hiring employees is to take some of the weight from existing managers and employees so that they no longer have to worry about activities that they don’t need to do any more. With proper recruitment, selection and training, employees should be able to do their job as well as those they are replacing, and perhaps even better. With clear roles and responsibilities in place, employees should be clear about deliverables and should be allowed to get on with executing their role without interference, unless periodic performance reviews show that they are not meeting their objectives. It is most unhelpful to stand over employees watching for errors or correcting their approach to doing their job.

Losing Sight Of The Big Picture Due To Focusing On Minutiae
This is closely aligned with micro managing but may not always be the same. For example, some business owners may be fussy and perhaps have a strong focus on a particular key performance indicator. They can be so intensely focused on a measurable, such as gross profit of a product or product range, that they may fail to see that a competitor has launched a new superior product on the market. Owner managers need to be able to see the minutiae and the helicopter view at the same time so they have proper perspective and can make appropriate decisions, based on full information.

Making Decisions On Instinct Alone
Seat of the pants decision-making is common with entrepreneurial businesses but as they grow, it is important for the owner managers to recognize the dangers of making rapid decisions based on gut instinct alone. As businesses grow, they become more complex and the effect of knee jerk decisions can be seriously detrimental to the health of the business. Complex problems or issues require more analysis and inputs from other team member before decisions should be taken. Slow down and use the resources available to you.

Business Owners Assuming They Have All The Answers
This point is similar to the last one except it may include the added danger of professional arrogance. I have frequently seen this in SME businesses where owner managers profess that external advisors don’t know their business as well as they do, and so their professional opinion does not count. What is frequently ignored is that sound management decisions are common across all business. What we observe in multiple industries, and within multiple businesses, has currency in most businesses if applied properly.

Bringing In Family Members To Hold Key Positions In The Business
Lots of entrepreneurial businesses start as family business and senior positions are filled with family members. Although this sometimes works, in my experience, family members may not always be the best choice for senior positions in a business. Familiarity may have its benefits but it frequently leads to bickering that would not be commonplace in non-family businesses. Also, sons or daughters of family members may not have the skills or temperament to manage the business or to have employees reporting to them. In my view, the best person for any job should be the one chosen from a range of qualified candidates, and not someone who gets the job because of birthright. If the family member is the most suitable candidate, that’s fine.

Frequently Changing Direction Of The Business
Unless there is an absolutely compelling reason to do so, businesses should stick to the knitting. If a business is really good at doing something and has a competitive advantage in the industry, it is very risky to look at what might be considered in vogue at the moment and to divert resources into that new area. In my opinion, vertical and horizontal integration is a better way to approach growing a business, unless there is a large strategic advantage in venturing into uncharted waters. Frequently chasing fads, simply because they are the in-thing, is not prudent unless you have almost unlimited resources. I have frequently seen businesses fail because they have loss sight of their core business.

Giving Mixed Messages To Employees
Although some matrix businesses manage to thrive, hierarchical structures are more typical for SME business owners. This usually means that there are clear reporting lines in place and that employees have a single boss to whom they report. Chaos ensues when there are multiple reporting lines, wherein different managers give different instructions to the same person. Also, if there is not a common theme and approach taken by managers, then this may sew confusion and employees may not understand what the business stands for and what the correct behaviors are.

Spending Working Capital on Fixed Assets
If there is a perceived need for equipment or assets in the business, the decision to buy or not buy should never be taken based on the amount of money sitting in the checking account. Assets need to be financed over their useful lives, regardless of the fact that there is a small surplus in the bank account. I have frequently seen SME business owners take the decision to spend the business’s surplus cash on a fixed asset, as if the cash was burning a hole in their pocket and they needed to get rid of it. For more information on fixed asset financing check out one of my other blog articles at http://howsmybusinessdoing.com/can-i-really-afford-the-new-equipment-my-business-needs/

Niall Strickland
CEO GrowthOracle.com

By | 2017-05-28T11:31:55+00:00 January 29th, 2016|Categories: GrowthOracle Blog|0 Comments

About the Author:

niallstrickland
Niall Strickland is CEO of GrowthOracle.com and creator of GrowthOracle business analysis software tools for Business Consultants, Advisors and Coaches. He is an MBA with 35 years of international business experience.

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