When a Small Business fails. What to do?

According to Michael Gerber in his book The E Myth Revisted, small businesses tend to be born from a core necessity of its owner. The necessity of independence, of doing what we know and are good at. That´s how we become entrepreneurs. The most common mistake we do: taking the work we love and turn it into a job. Work becomes a chore, among less familiar and pleasant chores.  

The worst part is when business owners become three people in one: the Entrepreneur, the Manager, the Technician. Conflict begins when each one of this personalities wants to take control. 

Don't
 be three people in one

The Entrepreneur turns any trivial condition into an exceptional opportunity, motivated by the creative engine and change. The Manager is pragmatic, a planner, clings to the status quo, sees problems to solve and roots itself on an idea. The Technician is the doer, lives in the moment, does one thing at the time. The Entrepreneur gets into his way with new ideas, which mostly don´t work in the real world, frustrating him, Manager represents a problem by reducing him to a part of “the system”, dehumanizing him.

Entrepreneur vs. Manager vs. Technician

Small Business owners get swamp by all this personalities, trying to be a whole, an individual, a business. Coming from initial exhilaration to terror, and from there to exhaustion and finally despair, with a terrible sense of loss, of purpose and loss of self. 

Most common mistake is becoming one single entity, owner and business together. This might be a good idea at its beginnings, but not viable in a future stage of business. Usually we tend to think “I´ll do it myself, because no one´s willing to work as hard as me for my business”, “no one has my ability, judgement or interest to do it right, so I do it myself” even when having people who are getting paid to do the job. Worse part of it, is getting into a vicious circle, because the more “I´ll do it myself”, the less they´ll do when you interfere with their jobs. But hey! You´re “The Boss”!

At this point you as owner have gone beyond your Comfort Zone, the boundary within which you feel secure in your ability to control your environment and start to lose control. Desperately you abdicate your role of manager and pass accountability to employees, hoping they will bring back control over the business. Really? Haven´t you thought they have needs of their own? They know how to be Technicians, so far they need to know why they are doing what they are doing, what they are accountable for, the standards against which their work is being evaluated, needing to know where the business is going.

At this point the business can take 3 courses of action; shrinking as its beginnings, broke, or surviving by beating employees and customers, ranting and raving at your family and friends because you have to be there all the time for it to survive.

If you´ve encountered this situation or are willing to avoid this reality there´s hope, but most of all clearness: Your business is not your life.

WORK ON YOUR BUSINESS NOT IN YOUR BUSINESS.

By creating a model of your business as a prototype that can be replicated effortlessly as many times as you wish by following 6 simple rules:

1) Provide consistent value, to customers, employees, suppliers, investors beyond what´s expected.

2) Get Simple. Make your business be operated by people with the lowest level of skills as possible.

3) Focus in Order to Stand Out.

4) Document all the work done in Operation Manuals.

5) Provide a Uniformly Service to the Customer.

6) Seek uniformity in the use of color, dress and facilities.  

Your Business is NOT your Life

BUILD A BUSINESS OF YOUR OWN AS IF YOU WERE BUILDING A PROTOTYPE.

Building a prototype of your business is a continuous process, we refer to it as the Business Developing process, founded in three main integrated activities: Innovation, Quantification and Orchestration.

INNOVATE- THE WAY YOU DO BUSINESS

Innovate - The way you do Business

Innovation has to do more than with a creative factor with the way a business does Business essentially. A mechanism for finding and keeping customers in a differentiated manner, where the business is the product, putting itself in the consumers mind by how it interacts more than what it sells. 

Innovation might be slight changes to your business that don´t require much spending, such as the way you greet or interact with costumers or the way you dress. Always counting in the customer’s point of view and always simplifying the operations. Everyone can be involved in it by asking which would be the best way.

QUANTIFY - ALWAYS

Innovation has to be paired to quantification, if not it would be a lost effort.

Your business may be lacking the process of quantification when it comes to innovation and this should be done at the outset of the Business Developing Process by beginning to quantify everything related to how you do business, going from how many customers do arrive in the morning to the afternoon, to how many people call your business each day, how many of your products are being sold to which days of the week are the busiest. This is a good way of diagnosing the health of your business, to know where you are and where you are going to.

ORCHESTRATE – SAME RESULTS EVERY TIME 

When innovating a process and quantifying the innovation´s results you will be ready to orchestrate your business, this means eliminating discretion or choice when operating.

You´ll be able to plan and anticipate by creating order instead of chaos, producing a consistent, predictable results every single time, no matter what business you are in.

Giving your customer what he/she wants every single time in your unique way will project the perception you want for your customers to become loyal to your business.

The Business Development process is dynamic, looking for the world´s changes and adapting to them. You may call it differently; Reengineering, TQM, Kaizen or Excellence. Nevertheless a way of doing something, quantifying it and orchestrating it, will take you necessarily to improvement.

Orchestrate - Same Results Every Time

BUSINESS DEVELOPMENT PROGRAM

This will be the step by step process in which you transform your existing business into a perfectly organized model for thousands more just like it. Building your prototype.

First of all you have to find yourself, by deciding who you will be, how you will live, what your expectations are. Once you come out of your comfort zone, once you decide your PRIMARY AIM, what makes you tick, you may go on with the next steps:

STRATEGIC OBJECTIVE

This is a clear statement of what your business will do for you to achieve your Primary Aim. It is the vision of a finished product. Remember that your business is a vehicle to enrich your life rather than one that drains your life. It´s a product of your life plan, as well as your business strategy and plan (they provide the structure within which your business is intended to operate over time to fulfill your life Plan).

BUSINESS STRATEGY AND PLAN

Shapes the direction where your business is going to, how it will get there, specific benchmarks it will need to hit to be able to work. Also it will be useful for marketing your business with bankers, investors and alliances in the business community. Designed for implementation, it is a template for your business, to make certain that the time you invest in it produces exactly what you want from it.

You´ll have to answer specific questions such as:

How much money is your business going to make for you? Your vision translated in gross revenues, gross profits, pretax profits and after tax profits. Answering this questions will serve to your Primary Aim. How much do you need to live the way you wish, to be independent of work, to be free. Your business needs to provide you a return of investment. 

Is it an opportunity worth pursuing? Does your business has a realistic chance of achieving those standards? If you assume that it can it is worth pursuing.

Who´s my customer? You´ll need a Demographic Model, to answer who would be your most probable customer, defined by age, sex, income, family status, education, profession. This will help you determine why your customer buys and who she/he is, how many opportunities you have (your customers demographics) and how successfully you can satisfy the emotional or perceived need (your customer psychographics).

ORGANIZATIONAL STRATEGY

Creating an Organization Chart has a profound impact on a small company more than any other Business Development step. It will help to give direction, purpose and style of the business, which will be balanced, interacting and progressing with each other toward a cohesive whole marked by the strategic Objective and the Personal Aim on the top.

Organization should be around accountabilities or responsibilities more than around personalities. Make sure you look for:

• Defining the Position Contracts. 
• Thinking as shareholders with employees, always done as a corporation more than as a partnership.
• Prototyping the position by replacing yourself with a System that distinguishes the following from each other:

1.      Tactical work; the one that technicians do.

2.      Strategic work; the one that managers do.

• Working on the system as working in it. Create manuals.

Create the blue print of your business

MANAGEMENT STRATEGY

Creating a management system will be your management strategy. This means solving the problems provoked by the unpredictability of your people, through the process of management development which will give you marketing results by finding and keeping customers through efficient and effective processes described in operational manuals. It´s important to have a clear picture by hearing your clients.

PEOPLE STRATEGY

How do I get my people to do what I want? A question that small business owners continuously ask. The answer: By creating an environment where “doing it” is more important to your people than non-doing it, where it becomes a way of life. Creating a workplace culture is essential to the business. Work is a reflection of who we are inside, it´s an idea, if positive your business will reflect that optimism, if negative it will reflect that as well.

By creating a clearly defined structure of acting in the world, people will work for you not just because it excites them, but because of this structure through which they can test themselves and be tested, like in a game. They will buy into your game on how well you communicate it at the outset of the relationship. It´s communicated through beliefs on what your business needs to become -for your customers, for your people, for yourself- it needs to be more than just a place to go to work.

The hiring process is the medium of communicating the workplace culture, the idea and the beliefs. This first relationship has to be not a dehumanizing experience, but quite the opposite. Hiring, developing and retaining people should require a strategy built on an understanding of people completely foreign to most businesses and the system should be the solution.

By setting a Management System all managers are expected to produce results and inspire people to commit to the standards that are set by the business, from and for the business. You want people who want to play your game, not those who believe they have a better one.

MARKETING STRATEGY

The marketing strategy starts, ends, lives, and dies with the customer. Keep in mind that what your customer wants is probably significantly differently from what you think he wants. Define his needs by looking at who he is -demographics- and why he buys -psychographics will help-.

Ask your customer. Make a questionnaire. Ask the colors they prefer, shapes, words, brands of perfume, food, restaurants, automobiles, clothes, jewelry. Match brands and commercials that sell them, what messages are being send to them by companies who are successfully selling to them. 

Make a list of those customers who fit your Demographic Model in your geographic perimeter where your customers mainly live or work.

In small businesses you can´t afford to spend the money big companies do, but you can afford to spend the time, the thought and the attention on the same questions they ask.

Source: The E Myth Revisted by Michael E. Gerber.