Managing a Small Business - the Challenge

Most people who start their own business do so not because they are great managers. They do so, because they have some special skill, some special gift or talent and they believe they can market it and spend the rest of their lives doing what they love. Right? Well, not quite...

Once their business starts generating sizeable revenues and shows some growth, they will usually need to hire some support staff to share the burden. After all, a business, not matter how small, has many facets - or functions, we may say.

There is the actual production or services. Typically that's the core competency of the owner. This is why this person went into business in the first place - they are really good at this one thing and they love it! So far so good...

Then there is the function of sales and marketing, of course. Typically, a small business owner will perform this function himself, unless he is really not cut out for it, in which case he will have to outsource it.

Then there are finances - you know, the bookkeeping, the budgeting, cash flow, etc. Many owners like doing it on their own, they may get a family member to do it, or they will hire a bookkeeper.

By this point we may have the owner and perhaps two support staff members. That's not a lot to manage, although it can be too much already for some entrepreneurs.

Then there are taxes - sometimes that's another source of frustration - how do I know I have the right tax person? What if I want to change? How do I interview them?

If there is production involved, there comes the question of possible under utilization of facilities, if revenues are down.

You see, in my line of work - I am a small business accountant - I see many business owners struggling not so much with their products or service, but with the management aspects of their business.

Since so few of them have general management experience, this can be their greatest challenge. And so they try to manage, by trial and error, sometimes succeeding, if they are naturally good managers, and in other cases failing miserably, feeling dejected and demotivated.

In a small business growth cycle there is this in-between stage, when the business isn't making that much money to be able to afford a well-rounded management team, and yet it cannot succeed without those skills, either.

What skills do I have in mind here? Let's start with these:

1. How to hire a good bookkeeper? What questions to ask during the interview? How to test their skills?

2. How to supervise my bookkeeper? How to review their work, notice when they may need some training.

3. How do I manage poorly performing staff?

4. What about alcohol use during working hours?

5. My profits are way down and yet I cannot pinpoint the problem. How do I analyze my margins? My mix? How do I get the right information out of my computer system?

Thankfully, there are outsourced personnel management firms who can help, but the business owner must realize he needs their involvement before it's too late.

A part-time Controller will be able to help oversee the bookkeeping function and analyze profitability leaks. FINANCIALS for You (http://www.financialsforyou.com) specializes in that. But here again, a small business owner will need to develop an awareness to realize that his business lacks a certain skill.

In the end, like I said above, every business will end up with the same functions, but larger companies have all those functions represented in house, while a small business may need to outsource them on a part-time basis.

The critical element of his success will be knowing what is needed, procuring it and then managing it. He needs to be able to lead this diverse "team" so that everyone is working in one direction and with a common goal. Again - that's a leadership skill which is absolutely crucial to the success of his small business.

Without this focus and ability to provide direction, energies will be wasted, efforts dissipated, projects will be left unfinished and the morale will suffer.

I've seen many businesses fold at this stage of their development. It just wasn't "fun" for the owner any more. He couldn't devote his time to his "passion" any more. He had to do what he dreaded most of all - manage people, come up with budgets, etc.

A manager who can take his business through this stage successfully is well poised to continue building his company and grow even more.

Someone who cannot, should either do some serious soul searching to see if he could find the motivation to learn, or perhaps scale his business back to a level where he could just do what he loves and forget about the rest.