Excerpt from Character 13: Employee

Employee male sketchWhen you hear former small business owners say that this is the character they miss the least, what they’re really saying is that employee management is not a walk in the park.

Employees are idiosyncratic creatures, and when we pour all those idiosyncrasies into a small business like ingredients into a blender, most of the time we cross our fingers and hope for the best. Well, therein lies the average small business owner’s problem. It requires more than luck to select the right ingredients and blend them the right way to produce a palatable mixture—it requires skill.

Show me a small business owner complaining about employee problems, as many incessantly do, and I’ll show you a small business owner lacking employee-management skills. Many owners gamble with this important aspect of their businesses by settling for seat-of-the-pants employee management rather than acquiring the skills or help to properly hire, train, manage, and fire. Successful employee management is a critical aspect of managing for success. Consider the existence of human resource departments in big companies, usually led by a highly paid VP—clear recognition of the complexity and importance of employee management.

So what is a small business owner with limited resources to do? For most, a full-time human resource specialist is out of the question. Therefore, the owner must often fill the role ordinarily performed by an entire HR department in a big company, from recruiter to VP. And there’s not much choice in the matter because I don’t believe it’s possible to manage a small business’s staff effectively without a reasonable level of employee management skills. The question is, where do you gain that skill?

Excerpt from Character 19: Supplier

Supplier sketchThe daily challenges most small business owners face are numerous and varied in a Jack-of-all-trades kind of way. One minute you’re resolving an irate customer’s problem and the next refereeing a difference of opinion between two employees. You’re the owner. You’re the go-to person when issues escalate and the last thing you need is for supply issues to escalate to where they need your attention—by that point, disruption of supply might be imminent. And what a small business needs from its suppliers is stability and reliability so that it may in turn offer stability and reliability to its customers.

But supply disruptions can happen for any number of reasons—manufacturing and delivery delays, inventory shortages, import paperwork errors, erroneous or incomplete deliveries, and defective products, to name just some of the common examples. Then there is the age-old overdue payment reason. Suppliers like to be paid on time and will readily withhold delivery to reinforce this point.

The degree to which supplier problems constitute a headache for you depends upon the degree to which your small business relies upon a particular supplier. This brings us to an important consideration: whenever possible, before choosing to do business with a supplier, weigh the make-or-break effect it can have on your small business. Select thoughtfully.

My small business was tied to just a single supplier for each of about a half-dozen product types. This was due partly to the nature of the textile screen printing industry, which has a limited number of competitive manufacturers, and partly to my belief that brand monogamy would foster a closer relationship with suppliers and lead to advantages not enjoyed by brand polygamists—in retrospect, a decision I now regret. The rewards for supplier monogamy did not materialize. Instead, my business relied heavily on those few suppliers when a broader range of alternatives would have given us a greater variety of prices and quality options and hence greater market-penetration potential.

If you’re going to inextricably bind the future of your small business to the future of a single supplier and its brand, consider the pros and cons very carefully. It could be a double-edged sword.

Excerpt from Character 4: Lawyer

Lawyer sketchOn the day of the hearing David and I were seated in awkward silence in a courtroom awaiting the judge’s arrival. The judge entered, introduced herself, settled down behind an elevated bench and stared down at us over the top of reading glasses perched on the tip of her nose. She explained how she would listen to our respective positions and then give us each a frank opinion as to the strengths and weaknesses of our cases.

David told her that I had refused to pay for a piece of equipment that was in perfect working order when it was shipped from his factory. He said I had claimed the equipment was malfunctioning but that he had fulfilled his obligation under the terms of his warranty by sending replacement parts. The judge questioned him about the terms of his warranty and then asked if he had documentation to offer as evidence. He handed her a manila folder that appeared to contain nothing more than copies of invoices—just two or three pages.

She briefly looked at his documents and then turned her attention to me, asking for any documentation I could offer in evidence.

I handed over a three-ring binder about an inch and a half thick containing a copy of every document relevant to the transaction: all rough notes, transcripts of telephone conversations, letters, fax documents, emails, bills from the electrician, shipping bills, photographs of burnt-out dryer parts, and, most importantly, all the documents to and from my lawyers. Every document was filed by date and was numbered and recorded and indexed at the front of the binder. I was not the most attentive accounting student the University of Cape Town had ever seen, but one piece of advice from an auditing professor has always stuck with me: “Prepare your files in a manner a judge will understand.”

As I explained how my customer and I had been inconvenienced by the malfunctioning dryer and how it had caused expenses and loss of revenue, she leafed through my binder. Eventually she again turned her attention to David. What is it about a judge’s gown and glasses perched on the tip of a nose that is so intimidating?

“Mr. Brookes,” she said, “I don’t believe your warranty has any relevance in this matter.” She went on to explain that it was a case of not fulfilling a contractual obligation to deliver a properly functioning piece of equipment. She said that she believed that if he chose to go ahead with the suit he would be doing so with a very weak case. She suggested that he settle right away and avoid the almost certain possibility of incurring heavy costs. “As I leaf through Mr. Best’s binder I repeatedly see the name of one of the most expensive law firms in the country. I don’t think you’ll want to pay their trial bills.”

David decided to take the judge’s advice and agreed to a settlement that included undertakings to withdraw his claim, arrange to ship the dryer back to his factory at his expense, refund me for the electrician’s bills, and refund the travel and accommodation expenses I had incurred for flying halfway across the country to attend the hearing.

The fourfold lesson for any small business owner caught up in a similar situation is simply this: don’t launch spurious lawsuits, fight back vigorously if you’re the victim of a spurious lawsuit, prepare properly, and work with a good lawyer in a good firm.

Excerpt from Character 16: Virtual Assistant

Blind faith is not a good data-management strategy when working with a virtual assistant, particularly when the data may be sensitive. You risk exposure during transmission and after the assistant receives it.

Exposure during transmission can be addressed by digital security measures to thwart hackers and other digital miscreants. The greater risk lies in placing your sensitive data in the hands of a recipient you haven’t met working in an environment you haven’t seen. You may have no reason to doubt his or her integrity, just as I had no reason to doubt my virtual assistant, but even then it would still be imprudent to throw caution to the wind.

While your virtual assistant may be the paragon of integrity, what if the person in the next cubicle has a grudge against the agency or your virtual assistant and exercises it by misappropriating your sensitive data? Your pricing or other financial data might turn up in your competitors’ inboxes. Far-fetched, you think? Not unless you’re absolutely confident of the agency’s security measures. And how are you going to know that from thirteen thousand kilometers away?

In addition to covert exposure of your sensitive data, you should be concerned about overt exposure. Haven’t we all accidentally pushed the wrong button at some time or another and sent something to where we shouldn’t have sent it? It’s possible that your virtual assistant may have built-in measures to prevent accidental mishandling of your data, but do you want to take that chance?

So does this mean that security concerns negate the benefits of engaging a virtual assistant? Not at all! If the work involves sensitive data there are precautions you can take.

Excerpt from Character 11: Neighbour

The degree to which this type of business neighbour can be detrimental ranges from merely irritating to seriously destructive. Such neighbours could break your small business if, in a worst-case scenario, by their presence or behavior, they discouraged customers from visiting your premises or doing business with you.

Here’s an extreme example. Close your eyes. Picture a strip mall with a children’s toy store wedged between two adult entertainment stores with titivating window displays. Do you see any minivans packed to the gills with wide-eyed youngsters and their parents or grandparents driving up? No, I don’t either.

A less extreme but real example is a small flooring company I know, which is located alongside a convenience store. For about an hour every afternoon on school days, flooring company customers have to pick their way through a hoard of unruly high school students blocking the entrance to the company’s showroom. The students are convenience store customers and, typical of that age group, they like to ”hang out.”

To make matters worse, after the crowd disperses, the flooring company staff have to pick up food wrappers and other litter dropped in front of the showroom. The convenience store owner is sympathetic enough but he, personally, is not the problem. The problem is that the nature of his business is problematic to his neighbour. All the solutions tried so far have focused on eliciting cooperation from the students but, not surprisingly, all have failed. And nobody could reasonably expect the convenience store owner to discourage what amounts to a daily business boon.

Excerpt from Character 17: Computer Tech

Computer tech sketchYour small business will generally have access to one of three computer technician resources, depending where you’re located—there may be exceptions in some countries and small towns. The choice lies between sole practitioners, companies consisting of a staff of technicians (most are small, with ten or fewer staff), and nationwide franchises with multiple offices, marked cars, and logo-embroidered golf shirts.

The advantage of hiring multi-technician computer service companies over sole practitioners is that the former’s technicians have likely been tested for competence during the hiring process. When you engage a sole practitioner, the competence checking falls on your shoulders. In the end, however, it all comes down to the individual technician’s competence, regardless of whether he or she is a sole practitioner or an employee of a service.

Being able to communicate technical matters in plain language is also a welcome attribute in your computer technician. Tim was one such technician whose expertise we were fortunate to have for a few years. He had a knack for explaining complex technical issues in plain English. When we were switching our operating system from MS-DOS to Windows, programs operating on the old and the new operating systems clashed and caused each other to malfunction.

Instead of the usual techno-talk about bits, bytes, and binary numbers, Tim likened the clashing of programs to the two of us trying to leave the room by the same doorway at the same time—neither of us would be able to move. In the context of what we were experiencing, his comparison helped us understand the issue better. And sure enough, once all programs were operating on Windows, everyone came and went through the doorway in an orderly fashion, one at a time, and without further clashes.

A few years later, another technician demonstrated a similar ability to explain technical matters in plain English—perhaps plainer than I had bargained for. We were making a major upgrade to a program on the server, and it had come down to one final press of a button. Neil, the technician in question, had spent a number of hours getting us to that point and, as he stood poised for that final press, he wanted me to understand that, once done, there was no reversing the process: “You know that we can’t cram the shit back in the horse?”

In addition to being a plain speaker, Neil was also a very competent technician and it turned out that there was no need to cause the horse any discomfort.

Excerpt from Character 7: Landlord

Landlord skecthWhen the time comes to negotiate or renew a lease, not all landlords will approach it with the take-it-or-leave-it attitude Graham and Andrea experienced. Much depends upon circumstances such as prevailing vacancy rates in the area and the general economic outlook, among a host of other influencing factors.

I was about to sit down to negotiate the renewal of our main office lease with Jim, the property manager of the building. I’d heard that the landlord was aiming for an increase I considered to be higher than market value, and certainly higher than I anticipated accepting.

A lease negotiation can be like a game of poker, with each party trying to guess at the other’s cards before showing its own. I had minimised the guessing by advanced knowledge of the proposed rent increase. I also knew we were regarded as a desirable tenant and guessed that Jim wouldn’t want to add to the existing unleased bays in the complex.

About ten minutes before he was due to arrive for the meeting, I had an idea that, in retrospect, and in all modesty, was not only fun but a stroke of genius. I found a manila folder and filled it with an assortment of colourful brochures, price lists, and sundry promotional material we had lying about the office. I then wrote “PREMISES SEARCH” on the cover of the folder in black marker pen and placed it on the far end of the meeting room table, where it was out of reach but close enough for the title to be read.

By the end of the meeting during which Jim darted furtive glances at the manila folder, we had agreed on a very modest rent increase in line with what I regarded as fair. In addition, he agreed to my request for new carpeting at no charge. Amusing, stroke of genius, or manipulative, call it what you will—the manila folder of assorted screen printing pamphlets did its job.

Excerpt from Character 12: Burglar

Burglar sketchYour business is a target

This character is a regrettable reality with whom a small business owner is bound to cross paths—in some cases, repeatedly.

I’ve chosen the burglar to represent an entire class of characters with the same objective in mind: ill-gotten gain at the expense of a small business.

Unpleasant as it is to contemplate that your business is a target for unsavoury characters lurking out there with evil intent, you cannot afford to stick your head in the sand. You absolutely need to understand the extent and potential sources of the threats, and then you must take the appropriate countermeasures.

 

Shapes, sizes and disguises

The burglar’s gang of cohorts includes a wide range of characters in various shapes, sizes and disguises, from mindless and desperate shoplifters to technically sophisticated and ruthless hackers, and an assortment of characters in between. And all are intent on victimizing your small business.

They might be employees, customers or strangers; they might be dressed in three-piece business suits or ragged jeans and T-shirts; they might intrude in person, by phone, or online; they might be beautiful, ugly or faceless; they might be rude, crude, or charming; they might be armed or disarming; and they might brazenly appear in broad daylight or skulk about after dark. There is neither a stereotypical burglar nor a prerequisite for this occupation other than perhaps a psychopathic personality.

Excerpt from Character 14: Company Pet

JRT for bookOne such visitor was a consultant who occasionally tested for methane emissions in all the units in our industrial park. (There had once been a dump close by, and although the area had been reclaimed for baseball fields, there was still apparent concern about migrating methane gas.) He wore an electronic gadget on his back about the size of a day-hiker’s backpack. Attached to the gadget was a rubber hose, which was in turn attached to a hollow wand about the size and length of a walking stick. At the end of the wand was a rubber cup the size of a teacup that emitted a sniffing noise as the machine drew air through it. In Ryley’s defence, the consultant did look a bit abnormal, particularly when waving the sniffing wand about.

Their first encounter set the tone for all subsequent visits. Ryley was woken from a deep sleep in the sunbeam by a sniffing noise and a rubber cup inches from his nose. The rubber cup instantly suffered the same fate as a veterinarian’s stethoscope that was once suddenly and unexpectedly pressed to Ryley’s chest. In both cases, he did what Jack Russell’s instinctively do. He shook the rubber “rodent” fiercely to break its neck while clamping down with powerful jaws until he could be persuaded it was dead. If you’ve ever tried to persuade a Jack Russell terrier to release something firmly clamped in its powerful jaws before it believes that the quarry is ‘dead’, you’ll know there are few endeavours more pointless.

This type of behaviour would probably not be tolerated in big companies where the pets-at-work concept has recently become fashionable. Typical of big companies, some have issued policies and procedures to govern pets at work, and while that might seem too bureaucratic for the taste of most small businesses, discretion still has to be exercised. A total laissez-faire alternative is not a good idea either.

Some visitors will be afraid of dogs, some visitors won’t like cats, and some visitors will be allergic to certain animals. Few people can conduct business with a dog slobbering all over them or a cat strolling around on the meeting room table. If any of these visitors are customers or potential customers, the company pet could be bad for business.

The company pet isn’t going to exercise discretion around visitors; you have to do it.

Excerpt from Character 3: Accountant

The vexing issue of discounting

Any accountant in public practice can tell you about small business owners who make decisions on everyday business matters influenced more by what everyone else is doing rather than by the impact the decision will have on their businesses in their peculiar circumstances. For instance, a close and equally troublesome relative of pricing is discounting. It’s a strategy commonly used to boost sales for any number of reasons.

Discounting can be quite useful in dealing with inventory situations such as overstocking or redundancy. Quite often in these situations, the investment was lost when the product was bought, so any cash one can recover is a bonus. It’s certainly not an ideal solution, but recovering some cash is better than having the product occupy space while it ages—unless you’re a wine merchant.

Businesses run into trouble with discounting though when using it as a volume-boosting strategy. Typically, small business owners don’t properly analyze their discounting schemes and, as a result, these schemes can be more harmful than helpful. If the necessary financial acumen does not exist in-house, then the strategy should be discussed with an accountant or someone with similar insight into the effects of discount tampering. I saw a classic example of the potential consequences of thoughtless discounting in my own business, thanks to Andrew.

Excerpt from Character 2: Banker

Banker sketchIf you’ve not yet experienced business banking, you might be wondering whether it’s an exaggeration to suggest that bankers and small business owners dwell in different worlds. Be assured, it’s not. Bankers live in a nine-to-five bureaucratic world of policies and procedures, conservative risk management, suits and silk blouses, plush carpeting and furnishings, a guaranteed cheque at the end of the month, and, with some luck, a fat bonus cheque at the end of the year. That’s Mars.

Small business owners live in a world of long days, risk taking, sleepless nights worrying about making payroll, staff problems, customer retention, late shipments, and overdue receivables. That’s Venus.

Under these circumstances, small business owners should not expect bankers to see their world as they see it. Lack of familiarity militates against proper understanding. I audited close to a hundred small businesses, some repeatedly over a period of years, and valued close to twenty during the public accounting and consulting part of my career. As a result, I can assure you that while I spent more time and effort trying to understand these small businesses than any banker ever would, it takes a lot more than an audit or a valuation to come close to understanding a particular small business as well as its owner. Anne Michaels, author of The Winter Vault, in commenting on another author’s work, wrote that “nothing is known until it is held: in our hands, in our mind, or in our heart.”

If it’s unreasonable to expect your banker to know your business as well as you do, it’s equally unreasonable to expect him or her to understand your challenges and needs as well as you do and, therefore, to be as optimistic as you. That might be why loan officers are not on many small business Christmas card lists.

Excerpt from Character 1: Partner

Partners resizedPicture yourself in a cottage in the woods. The sound of the lake lapping the sandy shore drifts in through the screen door on the warm, loamy forest air. A chipmunk scurries about on the wooden deck and beyond that, a solitary fisherman sits in a small aluminum rowing boat on the lake hoping for a rainbow trout for supper. Both will soon move on, leaving you to pursue your purpose in absolute peace and without distraction.

This is the type of setting helpful to contemplating the partnership decision: a decision that could have a profound impact on both your personal life and business life; a decision best reached by a completely frank discussion between you and your inner self.

You’ve bandied about your business model exhaustively, and all that remains is to decide whether you’re going to go it alone or enter into a partnership. It makes no difference if yours is a new business about to be launched or an existing business at a crossroad—the decision requires the same degree of contemplation. Should you retain full ownership and hire the expertise and raise the capital you may not have, or should you trade away partial ownership and control to a partner or partners in exchange for expertise and capital?

This decision should not be made lightly. Unfortunately, it often is. In my experience, most people enter small business partnerships not thinking beyond the assumption that they can make more money in a partnership than alone. Much of what needs to be considered though has nothing to do with numbers and money. Commonly overlooked in business decisions of all kinds, including the question about whether or not to enter into a partnership, are the all-important “emotional” considerations. We’ll explore some of them in a moment.