"November 2009 marked the centenary of Peter Drucker’s birth – he died in 2005 just short of his 96th birthday – and the anniversary was celebrated in a series of events held round the world. He is widely regarded as the father of modern management thought, and debate centered on his views and legacy. What would he be advising us to do now? And what would be his response to the great financial and economic crisis the world is facing?
In fact, Drucker’s greatest virtues were his plain-spoken insights and practicality. If one word was mentioned more than any other at the conference, it was "purpose".
Drucker’s "five most important questions you will ever ask" should help any manager ensure that he or she leads a purpose-driven enterprise. Those questions are: What is our business (or mission)? Who is our customer? What does the customer value? What are our results? What is our plan? "

In reading through the article again, I was struck by those words: "The five most important questions you will ever ask", and by what they are:

• What is our business (or mission)?
• Who is our customer?
• What does the customer value?
• What are our results?
• What is our plan? "

As we launch into 2010 – and most of January is already over – I believe most small business owners need to take some quiet time aside, and answer these questions, about their own businesses.

Many of us will have grown stale. It may be business as usual, but it may also be that we shouldn’t have business as usual – because it wasn’t that great anyway! If we think that we’re going to make money in the same way we’ve always done, selling the same old products or services, with the same old technology – and sometimes the same old people, we really need to think again. Don’t just fade back into your business with a sigh! Grab it by the scruff of the neck and give it a good shake.

In an article entitled "Rethink Your Strategy: An Urgent Memo to the CEO" by Branstad, Jackson, and Banerji, they say this:

"As of October 2008, your job has changed. (The article was written a few months after the 2008 meltdown.) You need to readjust your mind-set for a future that looks very different than it did just a few months ago. These are extraordinary times to be in business. It is human nature to wait and hope that your company will emerge relatively unscathed from the downturn. But waiting is not an option. Nor is hoping! Instead, you must look objectively at your business and decide: Can you survive? Then swiftly and decisively pursue the course of action determined by the answer.
The weaker players should be scared. If your company is positioned poorly right now, it is time to face the facts. You are probably going to the wall – or, at best, your business will be much reduced. The most precious thing you have is time – and you may not have much. Figure out how to best position your assets and your people to give every piece of your company its best chance to succeed, even if under different ownership."

I have recently seen a few clients of ours "go to the wall"! And it has really saddened me. Most of my business focus is on helping businesses to grow from strength to strength, not in seeing them go down the proverbial slippery slope. What is worse is that I do not believe it was necessary for that to happen. Steps could have been taken to prevent it. So, why did it happen? Well, Captain Hindsight never lost a battle, but if we’re prepared to confront reality, the issue was one of poor management – in a variety of forms. Not making decisions when they needed to be made; not making decisions at all; making wrong decisions and then blaming someone else for them when they failed – all of these and more. In many ways, though, they did not go back to basics when they needed to.

Whenever I’ve been faced with making some tough business decisions, I always go "back to basics" first. And for me, those basics have been enshrined, if you like, in Drucker’s five questions. So, let’s unpack these a bit more:

• WHAT IS OUR BUSINESS?

Face up to it! Who are we? What do we sell? Do we need to change any of it? Is our product or service good? Is there a need in the market for it? Are we better than our competition? Is there another way we can do it? Does the market know us? This question is really at the heart of purpose, and right now, we need to be very clear on what the purpose or mission of our business is.

And now is not the time to come up with some boring, trite mission statement about your business – it needs to be bold, compelling – even passionate. If you’re an athletic shoes company like NIKE, there is very little purpose in a statement like: "To make and sell athletics shoes on a worldwide basis." That’s boring – and about as passionate as a piece of steak! Come up with something like they actually did – "Crush Reebok!" It may not sound very ‘nice’ but man, it certainly does have purpose!

This kind of corporate reflection is good for the business soul. It will help you to see what your business should be and could be. Then, once you’ve got that picture in mind, line it up with what you’ve got. The difference between the two pictures is what you’re going to have to pay attention to in the weeks ahead.

For my money – our businesses need to be relevant to the time and the place. There’s no point in trying to sell grandfather clocks and other collectables in an informal settlement – you need to be selling basic food and clothing.
And, be sure the focus is right! One client of mine has just made the discovery that it isn’t the product he sells, but the solutions he provides that’s important. His customers would buy any product from him, because they trust him. This changes his entire marketing strategy, even though the product he sells is unlikely to change too much.

• WHO IS OUR CUSTOMER?

Are they the ones who place small variable orders and expect you to jump for them? And do you? Are they the ones who make you wait for payment, – even if it’s only ten days over term – and then still expect their settlement discount? And is he your customer, or your salesman’s customer? Do you know him personally? If not, if your salesman leaves, your customer could leave with him. Where is this customer? Is he nearby or is the cost of transporting goods to him ravaging your profits? And there are a host of other questions which spring to mind under this heading.

Do some statistical research from your business data base. Analyze your sales per customer over the past two years? Analyze your profit per customer over the same period. What are the trends? If sales have been dropping off, it’s possible that two scenarios could be developing – the customer is buying elsewhere, or he’s going out of business. Either option needs your attention.

• WHAT DOES THE CUSTOMER VALUE?

In answering this question, I think sometimes we need to ask ourselves this: "How would I feel about buying from my business?" Would it be a pleasing experience? Would the products be of a suitably high quality and reasonably priced enough to keep me coming back? Would I be willing to refer the business to my best friends?

• WHAT ARE OUR RESULTS?

This is probably the most important question to answer in these days. You will be surprised how few small business owners actually know how well they are doing? Inevitably, a business is only as good as its cash flow, never mind the profit. If your cash flow is positive – and growing – you’re making a profit. If its negative, you’re not only making a loss but its likely you’re in debt and that’s growing.
It never ceases to amaze me how many small business owners think they can continue indefinitely trading at a loss, and still take the same personal drawings every month. Losses have to be funded. They’re either funded by the owner or by his creditors .

It’s also good to know your results so that you can find ways to improve on them. Just because you’re making a profit, doesn’t mean you’re doing well – you could be doing a hell of a lot better!

• WHAT IS OUR PLAN?

Once you’ve answered the other four questions, it will become obvious that you need a new plan – your business plan! Without getting into a whole lot of detail about who you are and what you’ve accomplished, make sure the plan simply states what your intent is, and how you expect to achieve it. I like to follow the pattern used by Jim Collins in his book "Beyond Entrepreneurship" because it keeps things simple. It should cover the following:

• An overview of where you’ll be heading.
• Comments on the products/services you will be providing.
• The kind of customer you will be supplying.
• The cash you’re going to need to fund this ‘new’ business.
• The people and organisation you’re going to need.

When this is all done, you’ll likely find that you’re feeling more motivated and energized about your business, and it will really take off.

My reasons for saying this are two-fold: firstly, we mustn’t overlook the impact on our economy of all the infrastructural development necessary to cater for the 2010 world cup, and all the ancillary business which sprang up as a result. Its been a bit of a feeding frenzy in some circles and like all good feasts, they do come to an end!
Secondly, it appears that our fairly restrictive labour laws tend to impair the effects of globalisation on our employment situation; employment lags behind the economy, so that the effects of a recession on employment are felt long after the effects on the economy. I think that has caused many to make bold statements like: South Africa has not been affected by the global recession to the extent the rest of the world has, – which are proving to be anything but true.

The question we should be asking ourselves is this: what happens to all the people involved in the building of stadiums, roads, drainage, hotel buildings etc., when the building is over; and when there are no longer any tourists around to occupy these white elephants?
Do we think our economy is going to be able to simply swallow them up in ready-made jobs? I suspect that the general unrest prevalent in the country right now, due in the main to poor delivery by government, may well escalate beyond government’s ability to deal with it, rationally. Politically, our government has to find a scape-goat that won’t damage their own tenure, and white-owned business (sadly) is the obvious target. Recent mouthings by the ANCYL’s Malema confirm this. Even now, business (and in particular white-owned business) is being accused of enriching itself at the expense of the poor masses. We’ve seen and heard this before, but it’s no less distressing!

So – we, as the many small-to-medium sized businesses in South Africa, – and which I might add employ more people than all the rest – are going to have to be prepared for what lies ahead. In the words of a noted Chinese tactician: “If you want peace, prepare for war!”

You may be a one-person business, or you may be a local merchant with 450 employees or more; whichever, however or whatever, you’ve got to know how to keep your business alive during economic recessions.

I would venture to suggest you take time out to plan and implement some of the following strategies:

• AVOID IMPULSE BUYING

Some of the things you can do and should do, include protecting yourself from expenditures made on sudden impulse. We’ve all bought things or services we really didn’t need, simply because we were in the mood, or perhaps due to the flamboyancy of the advertising, or even because of the persuasiveness of the sales person. Then we sort of “wake up” a couple of days later and find that we’ve committed business funds for an item or service that’s not really essential to the success of our own business.

If you’re incorporated, you can eliminate these “impulse purchases” by including within your company policy, a clause that states: “all purchasing decisions over a certain amount are contingent upon approval by the board of directors”, and then make yourself accountable to your bookkeeper/accountant. This will give you a chance to consider any “impulse purchases” a second time after you’ve had a chance to think about the need for your purchase.

If your business is a partnership, you can tell whoever it is that attempts to sell you something, that all purchase decisions are contingent upon the approval of a third party. In reality, the third party can be your partner, one of your department heads or even one of your suppliers.

If your business is a sole proprietorship, you don’t have much to really worry about. Think about your proposed purchase. If you really don’t need it or can’t afford it, don’t buy it!

• DON’T “SHORT-CHANGE” YOURSELF ON PROFESSIONAL COUNSEL!

Especially in times of emergency, be sure that you don’t “short-change” yourself on professional services.

Anytime you commit yourself and move full-speed ahead without fully investigating all the angles, and preparing yourself for all the contingencies that may arise, you’re skating on thin ice. Regardless of the costs involved, it always pays off in the long run to seek out the advice of experienced professionals before embarking on a plan that could ruin you. Its not just about whether a venture will fly – but whether its been structured properly to cater for the myriad, tax, and other regulations that can come back and bite you later on.  The Book of Proverbs has this to say:

“Plans fail without good advice, but they succeed with the advice of many others.” (Proverbs 15:22)

• CONCENTRATE ON YOUR BASIC NEEDS

Particularly when sales are down, you must be “hard-nosed” with people trying to sell you luxuries for your business. When your business is booming, you undoubtedly spend more time allowing different sales people to show you new models of equipment or a new line of better-looking supplies, but when your business is down, skip the entertaining frills and concentrate on the basics. Great care, however, must be taken to maintain courtesy and allow these sellers to consider you a “friend,” and call back at another time.

• FINE-TUNE YOUR FINANCIAL RECORDS TO CREATE INSTANT WARNING SIGNALS.

Whoever maintains your company’s books should reflect your way of thinking, and generate information according to your policies. If you don’t have someone ‘in-house’ who can do it for you, you should hire an outside accountant or accounting firm to calculate your return on your investment, as well as the turnover on your accounts receivable and your inventory. Such an audit or survey should focus in depth on any or every item within your financial statement that merits special attention. In this way, you’ll probably uncover any potential financial problems before they arise.

• SET UP A PERSONAL “POWER CIRCLE”.

Many small companies set up advisory boards of outside professional people. These are sometimes known as Power Circles, and once in place, the business always benefits, especially in times of short operating capital. Such an advisory board or power circle should include an attorney, an accountant, civic club leaders, owner/managers or businesses similar to yours, and retired executives – men and women with proven track records in difficult times. Setting up such an advisory board of directors is really quite easy because most people you ask will be honoured to serve. Even if there is a cost involved, it will add enormous value to the business.

Once your board is set up, you should meet about once a month and present material for review. Each meeting should be a discussion of your business problems and potential, and an input from your advisors relative to possible solutions.

These members of your board of advisors should offer you advice as well as alternatives, and provide you with objectivity. Also – don’t be hesitant in sound-boarding them by email if there’s a need. No formal decisions need to be made either at your board meetings or as a result of them, but you should be able to gain a great deal from the suggestions you hear.

An innovative, economic, and we believe exciting alternative, is to use our new internet-based financial service which has been designed for just this purpose. Check this, and a number of other options out, on our web site at www.finserv.co.za

• GROW YOUR CUSTOMER RELATIONSHIPS AND KEEP ON TOP OF YOUR ACCOUNTS RECEIVABLE.

When the chips are down; when the rubber hits the road; when the takkie hits the tar – whatever you want to call it – you need to know that your customers are not only loyal to you, but are going to stay in business along with you. Put together a strategic plan which will involve regular visits – especially to your key clients. Get to know their employees, their systems, their strengths and weaknesses – and don’t be afraid to offer assistance where you feel you can do so. Make them feel they’re part of your family – because when times get tough, blood is thicker than water!
But don’t allow them to abuse you with late payments. It should be that most of your customers have the money to pay at least some of the money they owe you, immediately. To keep them current and the number of accounts receivable in your files to a minimum, you should step up the number of times you call them. Call on them if necessary, and while you’re there keep your eyes peeled for signs of a business in distress, and your ears peeled for gossip which can alert you to problems. Remember, the ‘squeakiest wheel gets the oil.’
If you develop such a habit as a standard part of your operating procedure, you’ll find your invoices will magically be drawn to the front of their piles of bills to pay. Do not be hesitant nor too much of a “nice guy” when it comes to collecting money.

• KEEP YOUR BANK MANAGER HAPPY!

Something else that’s a very good business practice, but which few business owners do is to methodically build a good credit rating with their local banks. Most business owners I know keep away from their banks until they desperately need them; and then it’s usually too late.
Particularly when you have a good cash flow, you should borrow small amounts from your banks every 90-days or so. Simply borrow the money – place it in an interest-bearing account – and then pay it all back at least a month or so before it’s due. By doing this, even though it will cost you a bit, you’ll increase the borrowing power of your signature, and strengthen your ability to obtain needed financing on short notice. This is the kind of business leverage that will be of great value to you if or whenever your cash position becomes desperate.

• KEEP UP TO DATE ON YOUR INDUSTRY.

By all means, you should join your industry’s local and national trade associations. If your industry doesn’t have an association, consider starting one yourself. Sharing information and statistics can be very helpful. Most of these organizations have a wealth of information available – everything from details on your competitors, to average industry sales figures, to new products, services and trends.

If they give you a membership certificate or wall plaque, you should display these conspicuously on your office wall. You customers like to see such “seals of approval” and place additional confidence in your business when they see them.

• GET YOUR SPOUSE INVOLVED IN YOUR BUSINESS.

Still another thing often overlooked – if at all possible, you should have your spouse work in the business with you at least 3 to 4 weeks per year. (Especially if your business is sole proprietorship.) The important thing is that if, for any reason, you are not available to run the business, your spouse will be familiar with certain people and situations about your business. These people should include your attorney, accountant, any consultants or advisors, your major suppliers and creditors. The long-term advantages of having your spouse work four weeks per year in your business with you greatly outweigh the short-term inconvenience.

Your spouse also knows you better than anyone else, your strengths and weaknesses, and will be more likely to provide you with sound constructive and objective criticism than most employees.

• TAP INTO AS MUCH FREE BUSINESS COUNSELING AS YOU CAN.

Whenever you can, and as often as you need it, you should take advantage of whatever free business counselling is available.
There are a number of Small Business Advisory services available who have many excellent booklets, checklists and brochures available on quite a large variety of businesses. Many of these have their own web sites which are full of useful information, and links to other sites.
They also have management and financial assistance programs that can definitely benefit just about any small business. Most local universities and many private organizations hold seminars at very minimal costs, often without charge. You should also take advantage of free services offered by your bank and local library.

• KEEP TECHNICALLY UP-TO-DATE

You may feel no great need for continuing education courses, but if you learn even one new bit of information that will be of ultimate benefit to you or your business (or even your customers), the little time spent at a seminar or in a night course, will be a wise investment.
This is particularly important for business owners who themselves are technicians. Quite often, technicians don’t see the need to ‘brush-up’ on their expertise, believing that they are more than competent to do the job. While that may be the case, it doesn’t mean they’ve kept up to date on technology and new developments. Keep yourself open to learning new things and ways!

• KEEP YOUR FINANCIAL RECORDS UP-TO-DATE AND ACCURATE.

The important thing about running a small business is to know the direction in which you’re heading – to know on a day-to-day basis, your progress in that direction – to be aware of what your competitors are doing – industry trends and sales figures for businesses comparable to the size of yours – to practice good money management at all times – and to prepare yourself to solve your problems before they arise.
It is absolutely essential that you practice sound financial management and this means having an accounting system that provides you with key performance indicators as soon as possible after an accounting period ( after month end.), and someone who can interpret these reports to enable you to make informed decisions timeously.  Another important reason for this is that if you suddenly find yourself in a financial bind, and you need to get the help of your bank, having current, up-to-date financial management information will be of inestimable help to you. Bankers are more relaxed about lending to companies that are seen to be on top of their financial records.

• SEPARATE YOUR PERSONAL FINANCIAL AFFAIRS FROM THAT OF YOUR BUSINESS!

You need to know exactly how well your business is doing, and mixing personal expenses with that of your business is misleading. Don’t use your business bank account for personal expenses. Rather budget a specific amount for personal drawings each month, and then live within these confines until the business is doing well. Become an employee of your business – pay yourself a market-related salary, and then rely on dividends to reward yourself. And then, carry on in this way!!
Many business owners I know have a habit of rewarding themselves in advance. They do this by paying themselves huge salaries (beyond what the business can afford), and dividends from profits that haven’t been earned yet. Be patient, and be frugal – your time will come, and quite often when everyone else is struggling!

• EMPLOY THE BEST PEOPLE YOU CAN FOR THE JOB.

When times get tough, the best people are going to be your insurance against a recession, so don’t let the cost of employing the best people put you off. They will soon add sufficient value to your business to more than cover the additional cost. Not only will they add value, but they will enable you to grow as a leader too!
Employing mediocre people because you think that’s all you can afford is a recipe for disaster. You will have invested a disproportionate amount of your time training them, only to find they’re not sufficiently trainable anyway.

• INVEST QUALITY TIME IN YOUR STAFF

Even in difficult times, – when all you want to do is keep your head down and work, – you need to make time to invest in growing your employees, in their job skills and in their commitment to your business. Develop the loyalty factor in your business – surprisingly, money is not always the motivating factor. A dissatisfied and direction-less workforce can be the death-knell of your business.

Generally speaking, times are always tough for small businesses. In order to survive with a small business, regardless of the economic times, it is essential that you surround yourself with smart people, and practice sound business management at all times. Be sure that if you are doing well now, you will continue to be successful in the future.

The following extract is taken from the Gallup Organisation’s newsletter about Strengths management. While it clearly addresses how we as business owners should be managing the strengths of our employees, (and not just picking on their weaknesses) I felt it was important to consider from our own perspective – as business owners. The fact is this: whatever applies to employees, applies to us. If we are busy, busy, busy – operating in areas of weakness, or potential weakness, our motivation is going to go down, and so will our success rate. Let’s just consider these statements:
“In the April 2002 edition of the Journal of Applied Psychology, the Gallup Organization published research that proved that a more engaged employee is also a more productive employee. The research also proved, if proof were needed, that a more engaged employee is also a more profitable employee, a more customer-focused employee, a safer employee, and an employee who is more likely to withstand temptations to jump ship. Many of us have long suspected this connection between an employee’s level of engagement and the level and quality of his or her performance. This research laid the matter to rest.
Neuroscience tells us that between the ages of roughly 3 and 15, a person’s brain organizes itself by strengthening the synaptic connections that are used frequently, while those that are used infrequently wither away. As Dr. Harry Chugani, professor of neurology at Wayne State University School of Medicine, describes it: “Roads with the most traffic get widened. The ones that are rarely used fall into disrepair.” Beyond a person’s mid-teens, that unique network of synaptic connections, in which some are strong and robust and others non-existent, does not change significantly. This means that a person’s recurring patterns of thought, of feeling and of behavior do not change significantly.
The practical implications of this are hard to miss. Because a person’s talents do not change much after he is hired, we must be very careful whom we select. We must identify the talent levels common to the best in the role and build our selection instruments to find candidates who possess similar levels of talent. We must begin any developmental work with a person by first identifying his strongest areas of talent. Of course, none of this implies that a person cannot change. Not only can he learn to better channel his talents by stabilizing his values or by developing a measure of self-awareness, but he can also be taught new skills and knowledge. He will learn the most, change the most, and improve the most in those areas of his brain where he already has the strongest synaptic connections.
What neuroscience is telling us is that if we want to develop a person, if we want to net the greatest return on our investment in his growth, the best thing to do is identify where his talents lie and then expose him to skills, knowledge, and experiences that build on those talents to create consistently excellent performances — what Gallup refers to as strengths. In Professor LeDoux’s words, we must help him create new buds on his existing branches, rather than totally new branches.” (The Four Disciplines of Sustainable Growth.)

These comments are very relevant to our organisations as a whole, and wherever possible, I believe it is vital that we begin this process of ‘strength-development’ with our respective work forces.
However, what is even more important is the fact that we need to apply this process to ourselves – to our own contribution to the business. If we don’t, all we’re going to end up on is the treadmill – overworked, over-stressed and under-paid.

SO, – find out what you’re good at, develop those strengths and then use them to specialize in a very small niche. If you’re the owner of a small business, then it’s likely that the business is an extension of yourself. The organisation tends to take on the character of its founder/owner; your core values and belief systems will infiltrate the organisation – even without your knowing it. The business itself can then begin to operate within this specialized niche area, until you become known as the ‘supplier of choice’ to hordes of satisfied customers.
I came across a true story in Michael Gerber’s little book “The E-Myth Contractor” which is relevant. It’s a great story and one which brings tears to the eyes – especially when one thinks of the generally poor service dished out by people these days. It’s quite a long story, but really worth reading:

“Marino Santos us was a framer; he and his small crew subcontracted the framing of houses in Southern California, Arizona, Nevada, and Colorado; wherever the work took them. To the general contractors who hired them they were simply known as Santos’s crew. Within Santos Construction – more like a small band of men than an actual business – they thought of themselves as los apassionados sin igual – “without equal”.
Everyone in the trade new Santos’s crew. They were the stuff of folklore. No one disputed that they were the best, but it was more than that. A mystique surrounded them wherever they went. They were a tight bunch. At breaks they hung together, drinking coffee, eating burritos and whispering among themselves – a cluster of stars!
But when Marino Santos and his crew went to work, there was nothing quiet about them. Their framing hammers fairly flew. Walls went up in record time, first one house and then another. The sounds of their tools at work reverberated off the hills. Often they worked to music. For Santos’s crew, every day on the job was a performance, a dance, a crusade. It was what they did, yes, but more. It is what they lived to do. It was who they were.
And then one July morning on his way to a job in Barstow, California, Marino Santos’s pickup blew a tyre and left the road at 90 miles an hour. It turned over five times, finally coming to rest upside down against a boulder. Marino Santos lay trapped in his truck for thirteen hours before help arrived. His back was broken. What a miracle that he survived the accident, everyone said. He failed to see the miracle. In fact, he was blind to everything except one unassailable fact – He was finished with the framing business.
What does a framer do when he can’t frame anymore? Especially one who is driven to excellence as Marino Santos? This framer drank, and for the next six months was rarely sober. Sometimes he railed at the night, flinging his empty whiskey bottle through the closed bedroom window into the street. For hours, he would sit in his wheelchair amid the shards of broken glass, screaming at the injustice. His crew came to visit him every day. They cried with him. They sat silently with him. And for a long time, nothing changed. Then one-day it did. Marino Santos was getting better. At last, Santos called his crew together and apologised for his stupidity. “I don’t want to be stupid anymore” he told them, “Its time to start a new business.”
The new business would be in construction, but in what field? Yes, that would take some study. In the meantime, he knew this: his new business would have as great an impact on the people around them as the old business had had.
One-day, Santos addressed his crew. “I have thought about this a good deal,” he said. “It comes down to this: Either, we went for a living, like burros, until we can’t work any more. Or we find a way to build a business that works for us. We think about this business; we put our minds to it, and we shape it so that it works like we have learned to work, with precision, joy and energy. “But we must build it so that it works even without people like us. We must make it easy for people who are not like us to act like us. We must learn how to give our fierce pride to people who do not possess it naturally. And we must make it possible for everyone who works in our business to become as good as we are. That will be our gift to them.”
Santos paused and looked soberly into his men’s eyes. “Brothers, what I’m suggesting is a risky venture. I have no way of knowing it will be successful or not. But I know in my heart it is the path for us to follow.” Santos instructed his men to take jobs in a segment of the construction industry that was new to them. They sorted the industry into new construction and reconstruction, commercial and residential. They then broke those parts down into sub-parts, which they analysed using certain criteria. The new business had to be in a segment of the industry that: (1) had consistent growth; (2) did not rise and fall dramatically with the economy; (3) Essentially repeated the same tasks from job to job; (4) wasn’t capital intensive to start or maintain; and (5) could be operated independently of other contractors – that is, they could secure, start and complete a contract without having to depend on general contractors or other subcontractors to do their parts of the job.
Every night the men gathered in Santos’s kitchen to have a cold beer and report their findings. Often, they argued. But gradually, as the men became smarter about their mission and more eloquent in their expression of it, the arguments became less heated. Santos’s strategy was simple; as one specialty after another was eliminated as an option, those employed in that field left their jobs and found work in one of the remaining fields, until, in the end, everyone was working in the same field, the one of choice.
And that’s exactly what happened. After two and half years of dedicated work, research and planning, all signs pointed to the kitchen remodeling business. This was the birth of THREE-DAY KITCHENS.
How many people do you know who are willing to devote such effort, intelligence, care and attention to choosing the right path? Most of us just stumble ahead, hoping it will turn out all right in the end. Even with all that research, Santos still wasn’t satisfied. He and his crew installed hundreds of Kitchens, – just for practice. Every imaginable problem was confronted, dealt with and overcome. It would be another two years before the crew took on their first kitchen for pay.
At night, they gathered to discuss the problems they faced that day on the job, analysing every peculiarity, every exception. No one, they were sure, had ever devoted as much time and intelligence to solving kitchen remodeling problems. They were determined to get it right.
Their goals were: (1) to create a kitchen remodeling system that could produce an absolutely predictable result in the hands of novice workers trained only in their system, and (2) to figure out how to renovate or remodel any kitchen within three days, at a cost lower than the competition.
Actually, Santos and his crew discovered that the competition was not a problem. The crew reported daily on the waste, inefficiency, apathy and lack of management on the jobs they were working. No, other contractors would not determine the fate of Three-Day Kitchens Marino Santos and his men would.
They studied every variation on every theme, created a variety of preplanned Kitchen solutions to address each one of them, and devised a preprogrammed construction and installation strategy for each type of kitchen. Then they recruited, hired and rigorously trained a small crew of inexperienced technicians in the construction and installation system. Finally, they created a management system to ensure that the system would be used exactly as planned, every time. Then they practiced, – practiced, – practiced! In the end, they invented a kitchen remodeling system that allowed them to install a kitchen in three days or less – guaranteed!
After all those years of preparation and study, Santos’s first paid kitchen was a sweet moment for him and his crew. It went off without a hitch, just as they knew it would. They had planned it that way, and practiced until nothing was taken for granted. Their first customer was appropriately astonished. Not only was the job done exactly as promised, but the workers were clean, well organised and fastidious – “almost joyful” the customer enthused. “How you find such good people?” she asked. Marino Santos smiled. “I wish I knew,” he said.

After I’d read the story, I found myself wishing for two things – one, that I could find people with such a passion for what they did; and two, that I could become one of them myself!

Most of us who are entrepreneurs have asked that question from time to time. Even though it’s a struggle, we probably wouldn’t ever trade the hassles for the freedom and the sense of being in charge of our own destiny.

Yet, – it can be very lonely, not having anyone on tap to discuss things with. Owning and managing a small business can be very lonely. Sure, you’re surrounded by people – employees, customers, suppliers – yet its in those quiet moments before a storm; those times when big decisions need to be made; when all seems against you – its then you can feel at your loneliest.

Of course, we can make appointments to see our Accountant, or our Attorney – rather like we make appointments to see the doctor. And like the doctor, our accountant generally is pretty far removed from the day-to-day action of the business. He will look at a few figures and make a few suggestions. If they could, they’d write out a prescription that would read something like, “go back to the office, sell all your slow moving stock, collect your outstanding debts and you’ll be fine.” That’s true! Most of us know this instinctively – the problem is we usually don’t know where to start and even if we did, how do we fit this in an already hectic day? Trying to keep the production line humming, customers satisfied, supplier’s accounts paid – sometimes all at once – and still find time to go out there and find new business – its no wonder so many small businesses fold.

Once the cycle begins, it becomes harder and harder to break out of it. The cycle becomes a vicious one. Initial problems lead to greater ones. It becomes easier and easier to find someone or something to blame. The more time you spend managing your cash flow the less time you have to go out and find new business. The more time you spend blaming your employees for their lack of commitment, the less time you have for praising them for work well done. The more work you try to do yourself, the less you seem to be able to achieve. Defeat stares you in the face!

Enough of this doom and gloom!

Let me say this to you: It’s in the midst of this kind of tribulation that we very often are able to turn the tables on defeat – if we are sensitive to the early warning signals.

The very first thing we must determine is that we will not be beaten. In the words of the Apostle Paul: “We are hard pressed on every side, but not crushed; perplexed but not in despair; persecuted but not abandoned; struck down but not destroyed.” Paul wasn’t walking around with his head in the clouds, heavenly-minded but no earthly good; no, he acknowledged that life is full of challenges but each one can be overcome.
Read the biographies and autobiographies of great people in history, and again you discover that each of these people could have surrendered to setbacks many times. It is not possible to win high-level success without meeting opposition, hardship and setback. In fact, if you’ve never failed, you’ve probably never experienced real success. It is possible to use setbacks to propel you forward.

The Civil Aeronautics Administration in America is responsible for investigating every air disaster. We have a similar organisation here in South Africa. They do so in minute detail and every investigation goes on for weeks. They do this to try and prevent similar disasters from taking place again. Doctors use setbacks to pave the way for better health. Post-mortems teach them more about the human body. Rugby coaches analyse each and every game, especially the lost ones, to try and prevent the same mistakes from happening again. The principle they all adopt is this: salvage something from every setback. But we human beings are strange creatures. We’re quick to accept the plaudits in victory, and equally quick to blame someone else for each setback.

If you find yourself in this situation, here are a few suggestions you need to consider:

• Study your setbacks. When you lose, learn, and then go on to win next time. Ask yourself the question: “what can I learn from this situation?” If you can’t answer it yourself, ask someone else to help you. Then write the answer down next to a statement of the setback you’ve just been through, and then frame it and hang it on the wall where you can see it every day!
• Be Objective. Put yourself in a glass tube and look at yourself as a disinterested third party would look at the situation. Another way to consider the issue, is to zoom out and study the scene from afar. If you’ve ever used Google Earth on the internet, you’ll know what I mean. Zoomed-in you’re faced with a brown/green screen and not much else. Zoomed-out on the same spot and you notice that it’s a small town on the southern part of Africa. Same spot, different view! See if you have a weakness you’ve never noticed before. If you have, take action to correct it. Being constructively self-critical will help you to build personal strength and efficiency. Don’t get too introspective though and just look for faults so you can say to yourself “Here’s another reason why I’m a loser.”
• Stop blaming luck. It never got anyone where he wanted to go. Also – stop giving luck all the plaudits for the victory of others. Rather examine how they accomplished the victory and you will learn something new. When Gary Player was asked what the secret of his success was, he replied with: “I guess the more I practice, the luckier I get!”
• Be persistent (but not stubbornly so.). Persistence on its own is only one of the ingredients for victory – we also need to experiment. Many ambitious people go through life with admirable persistence and show of ambition, but they fail to succeed because they don’t experiment with new approaches. Stay with your goal but don’t beat your head against a wall. If you do, you may well end up breaking through the wall, but be brain-damaged for life as a result! If you aren’t getting results, try a new approach. Consider these two suggestions:

1. Tell yourself, “There IS a way.” This year, thousands of new businesses are being formed. Five years from now only a small portion will still be in operation. Most of them who fail will say, “Competition was too much. We had to quit.” The real problem is that when most people hit the TAR (Things Are Rough) barrier, they think only defeat and so they are defeated. The Proverb says that “as you think in your heart, you are!”
2. Back off and start afresh. Often we stay so close to the problem for so long we can’t see new solutions or new approaches. President Eisenhower of America once was asked at a news conference why he took so many weekend vacations. His answer is good advice for everybody who wants to maximise his creative ability. He said, “I do not believe that any individual, whether he is running General Motors or the United States of America, can do the best job just by sitting at a desk and putting his face in a bunch of papers. Actually the President ought to be trying to keep his mind free of inconsequential details and doing his own thinking on the basic principles and factors…so that he can make clear and better judgements.”

• See a GOOD side in every situation. Have you ever noticed how dark everything becomes just before a storm breaks? Have you also noticed how bright and clean and fresh everything is when the storm has passed? Well, life is pretty much like that. “In many ways, what we see in our past and visualise in our future determines how we view ourselves today – the present! When we look back, one thing is clear – life is short. When we look ahead, another thing is clear – life is uncertain. Most importantly, however, is that when we look to the present we discover that life is challenging! Because it is short, every moment presents challenging possibilities. Because it is uncertain, it’s filled with challenging adjustments.” (Charles Swindoll)

Success is possible against even the greatest odds. Charles Swindoll tells a wonderful story about the effects of determination on overwhelming odds. It tells of a man who moved into a new neighbourhood with his three Red Setter dogs. Early the next morning, he noticed through the back window that a small, scarred bulldog had crawled under the fence and was making its way towards his house. Before he could do anything, his dogs had attacked the bulldog and gave it a fearful beating – chasing it back under the fence, torn and bleeding. The very next day, to his amazement, the bulldog once again crawled under the fence only to receive a more substantial beating. Eventually, after a week of this happening, each day, he was alarmed to hear a terrified scratching sound and whimpering at his back door. He opened it to find his three Setters trying to get in! The bulldog had won!

People who have bull-dog persistence, who can grab something and not let go, have an essential success quality.

(If you, or someone you know, has hit the TAR barrier and would like someone to talk to, someone to guide them through the process of recovery to success, please ask them to contact me by e-mail at gary@finserv.co.za

If customer expectations or the nature of your business compels you to sell on credit, you need to manage the risk with a great deal of diligence.

• Customers who pay late (or not at all) cost you money by
• reducing your cash flow and
• directing your time towards collections rather than making more sales.

Bad debts, however, are inevitable for most businesses. The level will depend on your industry.

As a guideline for an acceptable maximum you can compare the cost of bad debts with the cost of insuring your book debts.

One of the best ways to manage your credit risk is to ensure that you have the basics right, and that all your employees involved in the sales and collections process know and understand a sound and simple credit policy. Used consistently, a well conceived credit policy helps you avoid the cost and frustration of handling late paying customers.

Here are nine points to consider which will help you create a simple but effective credit policy for your business:

• Decide who you’re going to offer credit to – all customers, for large orders or amounts of Rx or more, those who purchase at least x times per week/month, longstanding customers of x months or more.
• Decide on how you’re going to verify the credit-worthiness of customers. Will it be by ordering a credit report, checking references, or both?
• Fix the maximum amount of credit you will offer, AND STICK TO IT.
• Lay down guidelines for reducing credit limits. It may be reduced if the customer has a poor credit rating, an unreliable payment history, or one or more overdue bills.
• Decide on the credit terms you will offer. It may be deposit with balance due upon delivery, deposit with periodic progress payments, net 30 days or even COD.
• Be clear on the incentives you will offer for early payment. These can take the form of 2,5% discount for payment within 30 days of invoice, higher credit terms for customers who pay bills early, or just sending thank-you notes to customers who pay on time.
• Decide on action to take as a result of late payment by customers. It could include charging a Late Fees of Rx, and/or finance charges of x% (though there are now implications caused by the New Credit Act in this one), reducing credit limits or even a revocation of credit privileges.
• Formulate a clear-cut collection procedure. For example, if bills are over due by:

• 1 day  – we call the customer
• 7 days  – we call the customer
• 14 days  – we call the customer and mail a firm letter requesting payment
• 21 days  – we call the customer
• 28 days  – we mail a collections notice
• 45 days  – we send the account to a collections agency.

• Decide how you’re going to handle cancellations and refunds. It may be that they will be billed in full, billed proportional to work completed, refunds may be granted within x days of purchase, or even a ‘satisfaction guaranteed or money back’ commitment.

It has been my experience that businesses that are struggling to keep afloat tend to chase turnover, almost at any cost, to keep their cash flow ticking over. This is extremely dangerous and can be terminal. Bad paying customers are simply not worth selling on credit to. In fact, no business is better than bad business!

Collecting the debt invariably involves everyone in the business to a greater or lesser degree, and the cost of this can very easily exceed the profit generated by the sale, never mind the loss of opportunity to do good business! If the bad payer really wants your product he will find some way to pay you cash for it, so hold out for that. If he decides to go somewhere else – well, someone else’s loss won’t put your business into liquidation!

If you have to use a Collection Agency, check out its credentials first. A couple of years ago I decided to use an agency that advertised its rates at 15% of amounts collected. I discovered some time later that they had collected the money and had not paid it across to me. I eventually had to hand them over to Attorneys for collection, which really added insult to injury.

No one likes chasing people for money – it seems to be the job no one wants to do.  If you don’t – well, the results are obvious!  If you want peace, prepare for war!

You will all have heard the question which goes like: “How do you eat an elephant?”, and followed by the answer, “One bite at a time!”?

Everyone usually laughs knowingly, nods sagely and with a huge sigh, carries on doing exactly what they were doing before – struggling through the clutter in their lives! This topic has been coming up quite regularly in conversations I’ve had with a variety of clients. What I’ve started to realise is that it actually defines the paralysis many of us suffer when faced with seemingly insurmountable obstacles, – be they business or personal in nature. It’s probably never been as difficult in business as it is right now.

Just yesterday, one of my clients was expressing his frustration in not being able to do all the things he needed to do to sort his business out, and the thought of it was keeping him awake at night, bringing on panic attacks and generally de-motivating him. He knows what needs to be done, but the thought of all of it was proving too much.

He’s trying to eat the elephant in one bite. The picture this conjures up is obviously quite ludicrous – a man trying to stuff a 6-ton animal into his ever-widening jaws. (Something out of Looneytunes!) Even if it was possible to get it into his mouth, the weight of it would crush the man, and his digestive system would never cope with all that food. (He would probably need a powerful laxative and a lot of space!!)

Trying to cope with all the problems we take on, at once, is just like that! They tend to crush us, they wreak havoc with our digestive systems, and we tend to become a bit of pain in the butt to all around us! I remember when my wife went to the UK for a three-week trip some years ago. (She won’t mind me telling this story.) She’d been quite anxious and one morning she told me that she’d been worrying about all sorts of things, – getting to the airport on time, what to do when she arrives in Johannesburg, how to handle the crush at Heathrow, managing the transport system in the UK, the finances, and the trip back in three weeks time. And she hadn’t even left yet!

She was trying to take on the whole elephant in one bite.

Many of us do this, – much of the time. We tend to create problems that don’t exist and may never even occur.

So, – how do we overcome this habit? How do we start taking one bite of the elephant at a time?

Let me suggest the following:

• Carve up the elephant into cuts that you can handle at a sitting. You will get a fillet, some rump steak, some wing-rib, some pot-roasts etc. (Make a list of all those problems, those tasks that need doing, those plans that need action, – that have been building up in your mind to be a huge obstacle. Make sure it’s a written list.)
• Decide which cuts of meat you’re going to have first. (Prioritise those problems, goals, into tasks, and first of all, determine whether you should be doing it at all, or whether you can give it to someone else to do; then decide which require your attention first.)
• Decide on which days you’re going eat the fillet, the rump steak etc., and how many people you’re going have around for the meal. (Allocate specific dates to each task, and the names of the people you will require to assist you in accomplishing those tasks.)
• Forget the rest of the elephant and start with the first cut. If you’re like me, you will leave the best, most juicy cuts for last. (Put the thoughts of the obstacle out of your mind and address the first, most important task. Deal with the issues you least like doing first – its amazing how much stress you get rid of!)
• When you’ve finished the meal, clean up and throw the bones away. (Once the task has been accomplished, tick it off on your list and don’t re-visit it.)
• When the time comes for the next meal, take the cut from the freezer, prepare it, cook it, and eat it as before. (Move on to the next task, work your way through it, tick it off…and so on.)
• Eventually the freezer will be empty, the elephant will have been consumed, – and you will be amazed!! (You’ll get to the end of your list, the tasks will have been accomplished, and you will be able to look back on a job well done.)

There’s a wonderful example of this in the account of the creation of the world in the bible, in the book of Genesis. God could have just snapped His fingers and everything would have been in place in one big bang! He didn’t! He took it one day at a time.

Far too many of us allow opportunities to pass us by on the basis of “if only I could find the time to..”. Well, let me say this: – Time waits for no-one, so if you’re trying to find it you never will, for it will always elude you. You have to make the time! It’s a “decision” thing!

“One of the common denominators of successful people is a single-minded focus that allows them to concentrate on first things first. Ralph Waldo Emerson wrote in “The Conduct of Life”, “Concentration is the secret of strength in politics, in war, in trade, in short, in all of human affairs.” While many people squander their physical and mental abilities, successful people learn how to focus, concentrate, and persist.

Yet even those with a clear sense of purpose sometimes lose their focus and their ability to concentrate on priorities.

Why?

I’ve found it is usually the result of too much internal clutter. I’ve identified four types of clutter that I strive to keep out of my life. The benefit is that I’m much better able to concentrate on that which I do best.

Emotional clutter.
This is the relational baggage that can accumulate when we don’t forgive those who have wronged us, when we hold a grudge, or when we carry a chip on our shoulder because of a grievance long past. The price of holding on to emotional clutter is too high. Not only will it steal energy from your focus, but it has serious emotional and spiritual consequences, as well.

Administrative clutter.
Early on I discovered the need for a system to help me deal with multiple projects and multiple deadlines. I have at least 20 things to accomplish in the next three days, and I will be able to get them all done because I have learned to organize so I don’t waste time looking around for things or wondering what comes next. There’s nothing magical about my system. Find one that works for you and do it.

Calendar clutter.
This is simply mastering the basic principle of time management; you must prioritise your work and spend your best effort on that which will yield the most return. Take a few moments to start listing all the things you’ve done in the last 24 hours that gave you no return whatsoever. Why did you do them? Do they need to be done at all, or can someone else better do them for you? I haven’t mowed my lawn in over 30 years. Some people like working in the yard. I don’t. Why would I give a couple of hours a week to something that has no payoff for me when I could give those same hours to concentrate on my priorities?

Trivia clutter.
I always lose at Trivial Pursuit (TM) because I don’t commit to memory anything that I can find quickly in a book or from someone else. It’s not that I have a bad memory – I just don’t see the value in allowing insignificant things to detract me from my focus. Most people try to live in the path of a flood of trivial phone calls, emails, and meetings. I say get rid of the trivia.

With clutter-free living, you’ll find your focus clear and your anxieties diminished. More importantly, you’ll see a level of productivity that you’ve never experienced before. You are set free to concentrate on that which you were created to accomplish.

As far as I can see, there is one fundamental problem to running a jobbing business these days – the high fixed costs of employment are becoming almost impossible to control. Let’s take one small contractor as an example:

He quotes on a job. He allows five days for completion, thirty percent of the price for materials, and enough to cover overheads and a small profit. He gets the job.
In addition, in the course of the month, he quotes on and gets another ten jobs – jobs of various sizes, values and in different locations. He now has to ensure that his production team can manufacture the product on time and within budget, and that the various installation teams will do the same.

He knows that if he was left to do each job himself, he will be able to meet the relevant deadlines. He knows what he’s capable of, but his expectation of his team is too high. And, – doing each job himself; and managing his cash flow, and doing his marketing and managing his human resources; and finding some time to eat and sleep is well nigh impossible. So he relies on others – his employees, hopefully leveraging his time in such a way that he is able to ‘spread himself’ around.

But guess what? It doesn’t happen! If they’re not managed properly, these employees will stretch the job to the limit – after all, they’re being paid by the hour! And how is it possible for a small contractor to manage a number of jobs adequately, when this attitude prevails?

One of the biggest problems employers face in this age (and I’m writing generally) is that far too much emphasis is placed on the rights of employees at the expense of the responsibility of employees. That’s all we seem to hear emanating from Cosatu’s interminable conferences these days! It might help if more training was done on the basic responsibility of every employee to do a fair day’s work for a fair day’s pay, but I believe it is going to require a significant mind-shift in the minds of most employees to get this right. Employees today (generally) seem to believe that their only responsibility is to turn up for work, and that it’s the responsibility of the employer to see that they do it.

In addition, here in South Africa, we still have a number of archaic collective bargaining councils which impose huge pressures (and costs) on employers in the various jobbing industries. (I believe they are archaic and seriously in need of review.)
I understand why they were formed – at one time employees’ rights were being abused, – but surely with the advent of both the Labour Relations Act and the Basic Conditions of Employment Act, employees have all the recourse they could want, if they’re being prejudiced in any way.

For example, Electrical Contractors are faced with a minimum wage rate for each employment category (regardless of performance or ability), and a compulsory bonus – whether the firm has made a profit or not. (Once again, regardless of employee performance.) Peripheral employment costs imposed by these councils can add as much as 30% to a wage bill. In addition, because they cannot possibly police everyone, those contractors who comply with their legal requirements are prejudiced by a large number of those who don’t, and who get away with it.

These industrial councils will argue that if an employee doesn’t perform, he can be replaced. Well, have you ever tried to do that in South Africa? Even if the employer is correct in principle, it is of no relevance unless due process has been followed. The hassle for the small contractor, who is already stretched as a manager, is just too much, and very often they find themselves stuck with mediocrity out of convenience.

My suggestion, – and I know that it works because I’ve seen it work (and that it works for both employers and employees) – is that in the jobbing industries, allowance must be made for employers to employ their workers on a piecework basis. In other words, workers on various jobs are entitled, as remuneration, to a percentage of the job value, and that this is defined up front.
In addition, a performance bonus scheme is agreed, based on bringing the job in on cost (or less than cost), and on time (or ahead of time.) In each case, savings made by the contractor are shared with employees who worked on the job. Poor quality work, which can happen if the job is done too quickly at the expense of quality, will have to be rectified by the same workers and they won’t get paid for it. In this way, both risk and reward, in the jobbing environment – and which can be great either way – is shared.

This works particularly well for teams who get to know each other’s abilities and contribution to the team. Each team also ensures that loafers are not tolerated because it impacts on their income. In a very short time, teams become aware that the more work they do, the more they will earn; and the overall spin-off is amazing. And – and this is very important – it takes a huge management load off the business owner at the same time!

Over the past ten years or so, I have managed to get a few jobbers to introduce such a scheme. In every case, it meant a return to profitability within a very short time; and an efficient and motivated workforce. Sadly, in every case, it was blown out of the water by over-zealous Industrial Council inspectors or Trade Union officials. The Jobbers were told – conform or be prosecuted. Some conformed, and slid back down the razor edge to bare subsistence. Others closed their doors – and those motivated, earning, working employees all lost their jobs. There has to be something wrong with this picture! Surely, in an environment where jobs are being lost daily, the biggest employer of people in the country – the small business – should be encouraged to provide work wherever possible? Sadly, in South Africa today, it seems that process is more important than principle!

If I was a small contractor, trying to make a success of my business, this is what I would do (and let me say that if you decide to follow suit, you do so with caution and fully-informed of the implications):

I would divide my workforce up into teams led by skilled tradesmen and each team would be employed on a contract for contract basis. If I had no work, I would employ no people!

For example, if I was a Plumbing contractor, and I was awarded a contract to ‘plumb’ a house, I would employ a plumbing team, led by a qualified plumber, for the duration of that contract. Their employment with me would commence on the day the house needs them, and would terminate when the house was built.
The team would be told what the budget on the job was, and the time constraint for completion. They would also be told how much they would be paid as a team, how those payments would be made (daily, weekly etc), and how much bonus would be paid for bringing the job in ahead of time and cost.

My job would be to find as much work as I can for each team. It would be in my interests because the more work I get in this way, the more profit I would be able to make.

Quite frankly, if the industrial councils didn’t like this approach, then I would tell them feel free to sue me. When I have my day in court, I will ask the judge why I should be punished for providing well-paid work for people. I rather suspect I would receive a favourable hearing, and perhaps it would go a log way to addressing the current inequities small contractors face each day. (And if I didn’t I’d shut the business down!).

Over the course of the past year, we have seen large companies around the world, being rescued by their respective governments, even though everyone knows that the reason for their problems has been mismanagement on an unparalleled scale. It seems so unfair!

What about the little guys? Who’s going to help them out – especially now?

In this current recession, being a little guy is extremely difficult. Markets have shrunk and competition is fierce for what’s left. The little guys have found that their already limited margins are being squeezed even further, not only by the competition, but by banks and other lending institutions. Some firms I know have been confronted with overdraft rates of up to 5 percent above the prime lending rate – simply because the collateral they have to offer is insufficient, or the risk to the bank is regarded as too high.

Yet, is this ‘risk’ story really true in the case of many small businesses? If we consider the individual value of many of these small loans, they pale into insignificance beside the capital required to drive a large multi-national. And, even if we had to add a number of the small businesses together so that the total number of employees they have, – together – is much the same as that of the larger corporations, I’m sure you’ll find that the total amount of credit risk is still smaller than that extended to the big guys. The argument that bigger firms are better managed because they can employ expensive professionals doesn’t wash anymore – especially after the Enron and other similar disasters!

So – apart from the fact that the big guys are well connected and therefore have a greater chance of garnering government support during a recession like the one we’re in now – one could argue that rescuing a large firm with a large number of employees will mean that fewer people lose jobs. Yet, if we had to evaluate the credit risk per employee – perhaps by dividing the total firm’s debt by the total number of employees, – we would find that the little guys don’t do too badly at all.

But they have no chance at all of being rescued! Not by the government, and certainly not by the banks. It’s my experience that in many cases, banks have even been responsible for the demise of many small firms, which if given an even break would have survived and recovered. (the quickest way they do this is wait on a large deposit into the firm’s bank account, and then reduce the relative facility to that new level. The firm then cannot use that cash flow and usually closes its doors!)

I guess ‘big is back’ in times like these! Imagine being able to write off the vast amounts you owe, and go back to business as usual? I know lots of small-business owners who would give their eye-teeth for such a chance.

So – what’s the answer for all you little guys out there? How do we ‘make a plan’?

Well, I was reading about the Boer War the other day and in a sense it has some lessons for small business. Interestingly enough, it was the first time that the British army (the biggest ‘guy’ in those days!) had been defeated for many decades by any other army, let alone a rag-tag bunch of farmers (a little guy!). Secondly, it was generally regarded as the first form of guerilla warfare. If Kitchener hadn’t decided on his scorched-earth policy, and interred the families of the Boers, that war might have carried on for a lot longer.

I think that small business is going to have to adopt guerilla tactics in this present economy. For me, this includes:

• Keep your battles short and effective. Learn which ones to fight and which ones to run away from. Remember – no business is better than bad business. Watch the profitability of your customers and products and don’t waste time on the one’s which don’t perform. Cut your losses quickly.
• Make fast decisions on the run. Plans do succeed with much counsel, but don’t get caught up in the paralysis of analysis! He who hesitates is lost. Effective decisive leadership has never been more essential.
• Shorten your lines of communication. Use technology as much as possible and don’t duplicate work just because it’s always been done that way in the past. Keep it simple and effective. Challenge every process.
• Live off the land; lean and mean! Make every cent a prisoner; it must add value or it doesn’t get spent!
• Shoot the wounded. Don’t carry passengers. If there’s anyone not carrying their share of the load or adding value, get rid of them.
• Shoot straight and don’t waste your ammo. Deliver on time, as promised, and to the required quality. Don’t get caught up in the discount trap and back your products/services for excellence.
• Change tactics often within the same goals. Just when the competition thinks they’ve got you sussed, change tactics – and keep them guessing.
• Have an escape plan. This is high-risk, high-energy work. Take time to rest and reflect, but keep your eye on the ball. If things go pear-shaped, (and they can sometimes, due to circumstances beyond your control), don’t have all your eggs in one basket. Protect your personal assets wherever you can.
• If some of this makes sense to you and you feel you can relate; and you’d like to chat through some options – then contact me at Finserv or at gary@finserv.co.za