How to 'recession proof' a small business

Small businesses already have plenty to worry about. What about surviving a recession?

Thomas Ulbrich, executive director of the University at Buffalo's Center for Entrepreneurial Leadership, said small businesses can "recession-proof" themselves, but it's really more basic than that.

"Instead of trying to predict the next recession, let's just agree to try to run a great business each and every day," Ulbrich said at a recent small business conference in Buffalo. "If you can run a great business, we can live through a recession."

Ulbrich said too many small businesses fail to scale over time, threatening their long-term survival. Here are seven common mistakes he sees small business owners make, and his advice for avoiding them:

• You believed in the "self-employment myth." "If your business depends on you, you don't own a business, you have a job," he said. "And it's the worst job in the world, because you're working for a lunatic: yourself. You can't close it when you want to because you believe there's nobody there to do the work. You can't sell it when you want to, because who wants to buy a job?" (quote from Michael Gerber, author of the E-Myth)

 • You are a control freak and you can't let go. It's hard to keep good employees if a business is controlled by a single person who is "constantly barking orders at people and running at a speed that just doesn't work for those around us," he said. Try delegating responsibility and developing employees. And don't expect them to learn through osmosis.

• Many small businesses have no idea where they're going. All businesses should have a plan, but it doesn't have to be complicated. "Typically the best plans I've seen are one page and they can sit right on your desk, and it needs to become part of the culture of your business," Ulbrich said. He cited Southwest Airlines' "wheels up" mantra: When its planes are flying, the airline is making money. That strategy flows through everything Southwest employees do to help keep things moving, from the pilots who assist passengers with getting into wheelchairs, to cabin crew members who start cleaning the plane as passengers are exiting.

• You don't have the right people. Small businesses can be "loyal to a fault," locked into relying on the original team of employees even as the business grows. "It doesn't mean that those people need to go, but often what got you here is not the skill set that will get you to the next level," Ulbrich said. "Businesses stall because they don't build teams, and they try to use what they have." One solution: Create an organizational flow chart that lists functions instead of employees' names, and identify what specialties are needed. And constantly build a "virtual bench," identifying people who could fill future openings.

• You have no systems in place. Small business owners might think they don't have time to create systems. But if they create systems, they will make things easier on themselves, Ulbrich said. Subway has visual guides behind the counter for its employees to follow to make sandwiches. Airline pilots use checklists to make sure they attend to every safety detail.

• You don't hold people accountable. Owners need to overcome their aversion to having tough conversations with employees, Ulbrich said. Otherwise, they might end up firing employees who had no inkling they were falling short. "It is your responsibility to set your expectations, communicate them clearly and often, constantly coach, and ultimately hold people accountable," he said. "You've got to learn to have critical conversations."

• You fail to innovate. Find a way to stand apart from competitors. "You really have to understand how you're different," Ulbrich said. "Way too many small businesses have no differentiation." Businesses might try to compete as the low-cost option, by being innovative, or by aiming for "customer intimacy," which Ulbrich described as relationship building that goes beyond customer service. He cited Ritz-Carlton hotels as a model. "I have stayed in a Ritz-Carlton before where I had a Buffalo News under the door in a faraway place," maybe Boston, Ulbrich said. "How it got there, I have no clue. But that is customer intimacy."

Ulbrich spoke at "Level Up," a conference organized by M&T Bank and Amazon Web Services to help small businesses grow. The session was aimed at meeting small businesses' needs for training, education and enhancement of skills to scale up their operations, said Eric Feldstein, head of business banking for M&T.

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Matt Glynn– Matt Glynn has been a business reporter with The Buffalo News since 2000. He is a native of Youngstown and lives in Buffalo.

Trapped! Seven signs your business may own you and how you can escape.

Do you own your business or does it own you?

The inability for a business to operate without the owner present is a sure sign that you are captive to your business. It likely feels like your business owns you, instead of you owning it.

Businessman stuck in spiderwebYou may be surprised to learn that there are over 28 million businesses in the U.S.[1]  Despite that huge number, most businesses fail to scale. They exist solely because the owner is active in every detail of the day to day operations.

 There are plenty of additional statistics to support this idea:

  • Of all employer firms in the U.S.[2]:
    • 55% have fewer than 4 employees
    • 86% have fewer than 20 employees
    • 95% have fewer than 50 employees
    • 7% have fewer than 500 employees
    • 96% gross less than $1M annually

I’d be doing you a disservice to suggest that the quantity of employees or volume of revenues are the only markers of business success. They aren’t! We all know the small business owner that has a handful of employees, works 30 hours per week and takes home an incredible salary. But they are the outlier, not the norm.

In working with hundreds of small business owners over the past ten years I’ve come to recognize that there are just a handful of things that separates a great business from a struggling one.  Most of those struggles lie in the small business owner’s inability to scale their business beyond their finite abilities and available time.

For the sake of this article I will define a successful business, not as a certain number of employees or volume of revenue, but rather a business that can run without the owner making every decision.  A business that can run day to day without the owner being present every moment.

Can Your Business Run Without You? Take the test.

A good friend of mine and business consultant, once challenged a group of business owners to ask themselves if they had a successful business by having them answer this simple question…

“Can you leave your business for three weeks and not have the phone ring or open a business email?”

That’s a simple test to see if you have a business that can scale. 

Anyone can go away for a few days or even a week and the world won’t end, but as you move to two and then three weeks without hands-on contact the weak links will break. For many of you, your phone will surely ring. 

So, what does it take to have a business that can pass the three-week test? 

My seven observations as to why most small businesses never scale:

  1. You believed the self-employment myth
  2. You can’t let go
  3. You have no idea where you are going
  4. You don’t have the right people
  5. You have no systems in place
  6. You hold no one accountable
  7. You fail to innovate

Let’s tackle them one at a time.

You believed the self-employment myth

Do you have a job or a business? The key question you need to ask yourself is… “are you creating a true business or a self-employment charade you call a business?” 

Michael Gerber summed this up in his famous book The E-Myth.  There is no sense in me trying to do a better job than the master, so let’s hear it direct from Michael…

“If your business depends on you, you don’t own a business; you have a job. And it is the worst job in the world because you’re working for a lunatic… You can’t close it when you want to, because if you leave there’s nobody there to do the work. You can’t sell it when you want to, because who wants to buy a job”

Way too many people own a business like this.  If you do there is hope and you can escape the grind of this situation, but you’ve got to make some changes.  .

You can’t let go. Look in the mirror.

Many small business owners we work with feel overwhelmed. The good news is that you are not alone. They express frustrations at the helpless feeling of barely holding things together and they are just one mistake away from disaster.

 Why is that?

I think that most of us really need to look in the mirror.  If we are honest, the source of our angst is looking right back at us.

Many business owners are action oriented. They are driven by tasks that need immediate action.  They often lack processes, don’t communicate well and believe that no one can do the job like they do.  They’re moving at 100 plus miles an hour and stressing their company and employees alike. 

You might say they enjoy fighting fires and spend most of their time doing just that. Sound familiar?

Running at that speed usually means we manage our business by barking out orders. Or more typically, we have no ability to delegate and instead expect everyone around us to absorb what it is they need to do through some magical process of osmosis.  We expect them to read our mind.

It is important to build a business that doesn’t rely on us being there every moment and making every decision. To fix it, you must recognize it. Start by looking in the mirror and accepting that much of the problem is looking right back at you.  That’s a great first step.

You have no idea where you are going.

As Cheshire Cat once told Alice, “If you don’t know where you are going any road will take you there”.  In business the concept of taking any road may be very costly as we want to have the right road leading us to our destination in the most efficient and profitable way possible.

Do you have a strategic plan?

If you don’t have a clear strategy that you can communicate in 35 words or less, you don’t know where you are going.  If you don’t know where you are going, how can you expect your team to know where you are going?

Having a plan is critical. Strategy counts and it starts with a plan. A great strategic plan doesn’t need to be lengthy and complicated, but it does need to be thoughtful, supported by your unique set of competencies that give you competitive advantage in the marketplace. It also must be a living breathing document that can be responsive to changing market environments. 

Simplicity will always win.  Take for example Southwest Airlines and their storied “wheels up” strategy. When the “wheels are up” on their planes they are making money.  To that end they have built systems and processes to support this. From the way they load passengers, to the types of aircraft they fly, to the culture of fun that is exemplified in their culture…it is all in support of a strategy with a clear destination. 

If you don’t have a strategic plan, don’t over complicate things. Keep it simple. There are some great resources available and my favorite is the One Page Plan available from Verne Harnish and the folks at gazelles.com.

You don’t have the right people.

Would you enthusiastically rehire everyone on your team?  That should make you think and the answer for most is a quick, “no”! This is perhaps one of the greatest challenges, NOT having the right team.

 Often this starts with the inability to recognize that the people that got us here won’t get us there.  We are loyal to employees that were with us from the beginning or those that are family and friends.

I’m not suggesting you toss your team, but I am suggesting that as a company grows there is a need to layer in some more professional management practices and not everyone that was with us in the beginning will have those skills.  Some can grow into new roles, but many can’t, and this is a difficult realization for the small business owner.

No one should be promoted to COO or any other leadership role solely based on tenure and that is too often the result in small business. There will be times when it is necessary to find some new leaders with broader experience and skills to help us grow to the next level.  These are the key people that can help you take your company to the next level.

Business guru Jim Collins famously summarized this with a simple but brilliant premise that surmises that we will have a great team when we make sure that “we have the right people, in the right seats, doing the right things right.” 

A great tool to make sure you have the right seats is to build a functional organization chart for your business.  Focus on the functions you need to run the business successfully first and only then go back and add team member names to those functions. It is a great tool to prevent you from promoting people into the wrong seats by accident. 

There are many good articles and tools out there and we will provide an article just on this topic in the next couple of weeks. Stay tuned, but in the meantime, you need to be considering whether you would enthusiastically rehire all of your team members.

You have no systems in place. 

When every decision must be made by the owner, you become the bottleneck. If you ever expect to take that three-week vacation, we talked about earlier your team must be able to operate without waiting on you to make every decision.

You must have policies, processes and procedures that allow quality and replication of repetitive functions.  These don’t need to be complicated, but they need to be discovered, captured and continually refined. 

You don’t need to overdo this in a small business. In its simplest iteration you are building checklists. Surgeons use them. Pilots use them. Why shouldn’t you?

If you have no processes or systems, start by capturing those activities that your organization does often.  Start with a few and don’t feel like you need to do this all at once. Even capturing one frequently repeated process into a checklist will begin to cut back on everyone knocking on your door.

Add a new process to the list each week and collect the checklists into a binder and before you know it you will have a complete operating manual for your business that will simplify daily activities, speed up new employee training and offer continuity in your business offerings.

You hold no one accountable.

All the procedures and processes in the world are useless if you don’t hold people accountable.

It can’t be through the process of osmosis where we just expect our employees to know what to do.  It is the leader’s responsibility to set clear expectations, communicate them often, constantly coach and ultimately hold people accountable for their actions. 

We don’t like to do that. Most of us don’t like confrontation, but holding people accountable is not confrontation, it is simply being a good leader.  A great way to think about this is the concept of radical candor. Done regularly it doesn’t have to be confrontational.  There is a great resource to learn more about how to both “care personally” about your team members while “challenging directly” at radicalcandor.com.

You fail to innovate.

Finally, if you do all the above well and you still aren’t able to scale it is likely that you fail to innovate in our rapidly changing world we live in today. 

Innovate or die. 

We live in a world that is changing at a pace like no humans have seen before us.  In just 20 years technological advancements will be hundreds of thousands to a million times more advanced than today.

 We need to be on top of this change or our businesses will quickly become irrelevant.  Companies die when they get complacent and lazy.  We used to have a lot longer runway to adjust and fine tune our direction, but that is not true today.

You can engage innovation by creating a culture of continuous learning. Challenge status quo. Stay up on the latest technological trends in your industry by attending conferences, keeping an eye on your competitors and reading industry related journals.  

If you really want to know where the future is headed visit Singularity University at su.org to explore the opportunities and implications of the exponential change on your industry and business.

Now its your turn. Take control.

We’ve identified the seven areas that might be holding you and your business back.  Any one or all of them may be at the root cause of your frustration. 

The good news is that each is not that hard to change once you’ve identified it and are willing to put your mind to implementing incremental changes.

Get started. Commit to change. Don’t be overwhelmed. Take small steps.

  • Dismiss the self-employment myth and build a business that doesn’t require you to be there 24/7
  • Let go and build a team to support you
  • Build a simple strategic plan so you have a clear vision of where you are headed
  • Build a great team. Make sure you have the right seats, right people and they’re doing the right things right
  • Build systems and checklists
  • Embrace a culture of accountability
  • Create a culture of continuous learning and innovation

Good luck on your journey to building and owning the business the will enable you to pursue your passions and your dreams!

[1] SBA Office of Advocacy – United States Small Business Profile 2016

[2] U.S. Census Bureau. Fact Finder. Accessed 1/26/2018 – 2012 Census Data

SUCCESS, the choice is YOURS

Lots of BooksThere are 200,000+ business book titles in print. Why? How many possible takes can one have on running a business?  Why do we keep buying them? I read a ton of business books and I have to say that there are some great ones, at the same time many (maybe even most) are just a regurgitation of those that came before them.  Yet, they keep coming. 

Business titles continue to be produced and business owners continue to buy them. The answer to why may lie in the fact that most business owners struggle with success and are looking for quick answers.  After working with over 1,000 small business owners I can safely say that the answer to your struggles likely isn't in a book.  Nearly always, it lies somewhere within. 

You will begin to experience success when you conquer your fears, when you focus on areas of strength and interest, when you assemble and lead reliable teams, and when you have built a business based on blueprints of your own imagining based in a purpose greater than solely making money. 

Having a successful business is a choice, not a right.  There are no magic pills, a book, or even a consultant that can guarantee your success.  Only you can, but you have to earn it. You have to take an active role in envisioning the business of your dreams and then methodically putting the pieces into place that will ensure your success.  The actual act of running a business  isn't all that complicated.  You can learn all of the necessary pieces, but no one except you can decide to eliminate the many distractions that enter your daily life and instead choose to focus on the few initiates that will truly move your business forward. 

You are in control, the choice is yours. Now choose.

Join us for a free webinar, February 27th at 8:30a.m. EST where we address the topic "Why Businesses Don't Scale"

I love Dr. Seuss, but I think he got this one wrong

Dr.seussIt appears to be the perfect piece advice... "The more that your read, the more things you will know. The more that you learn, the more places you'll go."  Yet all too often we freeze in our tracks when we think we need to read one more article, earn one more degree or visit one more place before we are ready to act.  Trust me...you are already an expert at something.  You already have everything you need. It is time to step forward and start to live your dreams.  So please do go ahead...read more, learn more, and go more places until your hear is content.  But only because you want to, not because you have to.