In the past two decades or so, we have seen big business downsizing, rightsizing, unbundling and every other kind of ‘ing’ – and with an increase in the use of new technology, in many instances, became net job-shedders. Small business inevitably employs more people, and generally speaking, more people are self-employed around the world than are employed by the ‘big guys’. In spite of this, big business still gets more of the attention and ear of government.

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

This entry was posted on Wednesday, September 9th, 2009 at 11:34 am and is filed under Coaching. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.