management

Episode 09-A Guide to Managing the Ebbs and Flows of Small Business

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Small business ownership is not without its ups and downs. Even the best businesses can experience ebbs and flows, especially when you’re trying to grow your company from the ground up. How you manage the ebbs and flows of small businesses will determine whether your business succeeds or fails. If you understand the various ways in which your business can ebb and flow, and plan accordingly, you have a much better chance of succeeding long term. Read on to learn more about how ebbs and flows affect your small business and what you should do about it.

What is an ebb?

An ebb is a decrease in the amount of activity within an organization. This can be in a variety of areas including product sales, employee productivity, and customer service (among other things). An ebb might be caused by seasonal fluctuations in the market or changes in demand for the product or service you sell. An ebb can also occur due to outside factors that affect your organization such as economic downturns, natural disasters, changes in government policy, new technological advancements, and shifts in consumer preferences.

What is a flow?

A flow is an increase in the amount of activity within an organization. This can be in a variety of areas including product sales, employee productivity, and customer service (among other things). A flow might be caused by seasonal fluctuations in the market or changes in demand for the product or service you sell. A flow can also occur due to outside factors that affect your organization such as economic upturns, new technological advancements, and shifts in consumer preferences.

Why does a small business ebb and flow?

As discussed above, ebbs and flows are natural parts of the small business lifecycle. Furthermore, ebbs and flows are the results of three major factors – the market, the business, and the people. The market refers to the customers you sell to and the demand for your product or service. The business refers to your company’s processes, products, and services. The people refer to your employees, their skill sets, and how they work together. When these three factors are aligned, a business will have an upward flow. When they are misaligned, a business will have an ebbing flow. The trick is to recognize these ebbs and flows as they occur, and take action to correct them.

Strategies for managing the ebbs of a small business

– Market ebbs – The market ebbs are the result of changes in customer demand. When this happens, it’s important to ask why. Market ebbs could be due to changes in the economy, changes in the environment, or changes in government policy. When this happens, it’s important to take a step back and see if there is anything you can do to respond to the market. If not, there’s nothing you can do. Simply ride it out and hope that things get better. If there is something you can do to respond to the market, do it. This might involve changing your product or service, changing your marketing message, or changing your sales approach.

– Process ebbs – If a process ebbs in your business, it means that one or more of your business processes is underperforming. To correct an ebbing process, start by asking yourself why a process is underperforming. This can be difficult to do because it involves being brutally honest with yourself. Once you’ve identified the reasons why the process is underperforming, brainstorm ways to improve the process by addressing the root cause of the issue.

– People ebbs – If a person within your organization is underperforming, it could be due to a variety of factors. It could be that the person isn’t in the right role, or they’re having trouble with the work. Regardless of the cause, an underperforming employee can cause an ebbing of the people within the organization. When a process or person ebbs, start by asking why. Once you’ve identified the cause of the issue, brainstorm solutions to correct the issue.

Strategies for managing the flows of a small business

– Market flows – When the market flows, it means that there is an abundance of customers for your product or service. This could be due to seasonal fluctuations, or it could be due to new technologies or shifts in consumer preferences. When this happens, it’s important to seize the opportunity. You don’t want to squander your good fortune, or you risk losing it. If you’ve been in business for a while, chances are you’ve experienced an upward flow before. When you’ve experienced an upward flow in the past, take the lessons you learned and use them to capitalize on the current upward flow. If this is your first time experiencing an upward flow, don’t get too excited. This flow could slow down or even reverse itself. Be prepared and don’t get overzealous.

– Process flows – When a process flow is strong in your business, it means that one of your business processes is performing well. This can either be due to the fact that you’ve hired the right people and put them in the right roles, or you’ve optimized the process in some way. Whatever the cause, it’s important to capitalize on the strong flow by scaling it. Scaling a process means increasing the volume of the process to see if it can be applied to other areas of the business.

– People flows – When a person is performing well, it means that they are maximizing their contributions to the organization. This is either due to the fact that you’ve hired the right people and put them in the right roles, or you’ve optimized their work in some way. Whatever the cause, it’s important to capitalize on the strong flow by scaling it. Scaling a person means increasing the volume of their contributions to see if they can be applied to other areas of the organization.

Conclusion

The ebbs and flows of a small business are natural parts of the lifecycle. The trick is to recognize them when they occur, understand why they’re occurring, and take action to correct them when necessary. When you do, you give yourself a much better chance of long-term success.

The roller coaster ride of a small business is something that most entrepreneurs go through, but it's important to find balance. Watch the full episode here: Episode 9-How to manage the Ebbs and Flows of Small Business.

Growing Pains: Considerations for Growing Your Business

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Ask any small-business owner what he sees as the major challenges to growing his business, and chances are he’ll say: winning more sales. Ask any medium- or large-business owner what her major challenges have been, however, and she’ll probably say: structural growing pains — putting into place the necessary processes and structure to accommodate a higher volume of business. In fact, one of the most common reasons businesses plateau at a certain level is their inability — or unwillingness — to develop the structure needed for growth.

But aligning structural changes with sales growth is not simple. It is often more of an art than a science. The systems, processes, staff, and organization changes needed to grow are ongoing and dictated by myriad factors such as the nature of the business, its capital requirements and, ultimately, customer demands. Nonetheless, certain structural growth concerns — excluding financing and office/production space issues — are shared among all growing companies and fall into three overall areas: organizational structure, policies and procedures, and systems/technology.
Staffing/Organizational Structure

Among the most common growing pains small companies experience are those related to organizational structure. Organizational structure and reporting hierarchy for a 25-person company is quite different than it is for a five-person organization. Typically, an entrepreneur can manage fine until there are about a dozen people in the organization. At this point, the initial structure — where everyone usually reports to the owner — breaks down. In effect, nothing can be done without involving the owner, creating a communications log jam and a barrier to growth. A telltale sign of such a situation is the line of staff outside the boss’s office — waiting patiently for a decision before work can recommence. The best way to overcome or prevent this from happening is simple: Trust your key employees and learn to delegate. A good place to start is to look at where you are spending your time. You can still have final say on any important decisions, but you need not be involved with the time-consuming, day-to-day issues that can prevent you from focusing on larger, more strategic matters. It’s also important to formalize delegated authority with an organizational chart and job descriptions. These will help you better define functional expertise for a given job and for various departments across the organization, and provide the foundation for the growth of future personnel and key management staff.

Lack of functional expertise is another common growing pain of small companies. Too often, businesses fail to recognize that specific expertise is needed as they grow. Typically, small businesses are organized around the manager’s area of expertise, such as marketing, accounting, or production. This specialized expertise often prevents the business owner from recognizing problems that may arise in other parts of the business. It’s a good idea to periodically get an outsider’s opinion of where expertise may be lacking. These need not be paid consultants, but are often trusted business acquaintances. Tapping into this same group, you can also form an advisory board to give you periodic feedback on strategic direction.
Policies and Procedures

For most smaller businesses, written policies and procedures are often nonexistent and sometimes cursed. Typically, they are associated with the bureaucracy and inefficiency of big companies and the enemy of customer responsiveness and quick time to market. Not surprisingly, most smaller businesses have few documented operational policies or procedural guidelines. But it is precisely this lack of documentation — and the thought that goes into it — that can put a stranglehold on rapid growth. If your business is growing fast enough to require frequent additions to staff, formalized policies are a must for training purposes. Even if you are expanding at a moderate pace, documented policies will likely be necessary once you reach 20 or more employees.

What warrants a formal policy and what should be documented? This will depend on the nature of your business and average skill level of your employees. In general, however, it’s a good idea to document all HR policies in detail, expense approval authorization levels, inventory control policies, billing and collection procedures, and any operational policies that could materially affect your business if they went amiss. An annual budget and sales projection, updated monthly, are also a necessity if you are ever to obtain outside funding or sell your company. Later on, consider putting together a comprehensive policy manual where employees can get answers to questions when decision makers are unavailable.

As you grow bigger, you will also need to put into place more formalized communications channels for employees and customers. An informed and involved staff is usually a more productive and enthusiastic one; whereas a staff that is left in the dark often feels alienated and unappreciated. Regularly scheduled employee meetings, periodic e-mail updates, and a cascade communications policy are several ways to make sure your internal communications channels facilitate, not constrict, growth.
Is your business suffering from growing pains?
Here are some sure signs that structural changes may be in order.

* Sales continue to grow but profits do not.
* Everyone is working increasingly long hours.
* People spend too much time putting out fires.
* There are constant lines outside the boss’s door.
* There are no regularly scheduled meetings or employee communications.
* The “system” is constantly down.
* Aging equipment is not replaced.

Systems/Equipment

Perhaps more obvious than organizational or procedural growing pains are those associated with systems and equipment. Smaller businesses are often the last to upgrade to new technology, usually due to cost. Yet the costs of not upgrading are usually much higher. Low productivity, frequent down time, and incompatibility with newer client systems can cripple a business that’s poised for growth. There’s also the matter of keeping up with your competitors both operationally and across product and service offerings.

The average computer is virtually obsolete in just three years, and most of the widely used software applications come out with new versions every two years, so keeping on top of technological advances must be an ongoing endeavor. Start out by working regular capital upgrade costs into your budget. Consider dedicating a full-time person to information technology (IT), if you don’t already have one, and make sure he or she is current on the latest technological developments in your field. Even though you may not be able to afford all the latest equipment, at least you’ll be on top of technology trends in the industry and know what your competitors are up to — or are capable of.