Small Business Failure
Benjamin Franklin said, “If you fail to plan, you are planning to fail!”
This is exactly what business strategies and management systems are all about.
Bernard Swanepoel, chairman of The Small Business Institute, reports in an article from BUSINESSTECH that 70 % of small businesses in South Africa fail within the first two years of operation. Prof. Pieter Steyn of Cranefield College reiterates this and points out that the main reason for this is poor management.
So what is management?
If management is so important to small business, it stands to reason that we should understand what it is about. Merriam-Webster defines management as “the conducting or supervising of something” and the “judicious use of means to accomplish an end”.
There are four basic general management tasks in any business ((Kroon, J. (ed), 1990. Algemene Bestuur. HAUM – Tersiêr: Pretoria.)):
- Planning;
- Organising;
- Activating; and
- Control.
Another way to put this is the famous Plan, Do, Check, Act management method of continuous improvement. It is also known as the Quality Cycle and is all about business strategies and management systems.
Planning
Stephen Covey, the author of the famous book, The 7 Habits of Highly Effective People (( Covey, S.R., 1989. The 7 Habits of Highly Effective People. Simon & Schuster UK Ltd: London. )), lists as habit # 2: Begin with the end in mind. Surely, that makes sense? If you don’t know where you are going, how will you know when you get there? So, firstly, the small business owner should know where they are going. You must have a very clear goal in mind. But then you need a plan for how to get there. Your strategies and management systems contain this plan.
Strategy
Merriam-Webster defines strategy as “the art of devising or employing plans or stratagems toward a goal.” These are the plans that will get you to your goal. It will include things like the business purpose, vision and mission statements, operation, finances, marketing and communication.
Management Systems
The management systems are the policies and procedures that explain how to implement the strategies. This is the nitty gritty part of the business. It sets all business actions out step-by-step. The financial policy describes exactly how you will handle your finances. Procedures explain step-by-step how to handle specific business actions. It might be simple things like how we answer the telephone. These are the things we say, these are the questions we ask, and this is how we convey a message. More complex procedures will provide step-by-step instructions on for example how to manufacture a certain product. It will include the parts that are needed, the time that is taken to make it, the safety precautions that must be in place and again, a step-by-step guide on how the work is done. There should be either a policy or a procedure for every single part of a business.
And so they fail…
Sadly, it is right here that most small businesses fail. Because the owners believe that they do not have enough time or money to spend on planning, they fail to plan thoroughly and therefore they plan to fail. They believe that because they know how to do everything, it is not necessary to formulate the policies and procedures. They do not have time now and will do it later, when the business is bigger and there are more people.
The problem is that there will never be more time and there will never be enough people. If the juggler cannot walk when when juggling one ball, how on earth will they learn to walk when juggling ten??
And so they fail.
Help is available
Kanetwen can help you write your strategies, policies and procedures. We also write simple integrated systems using basic computer software that will link your different policies and procedures. This removes double work and save time.
If a small business does not have a proper plan in place, there is nothing to Do, nothing to Check against and therefore nothing to Act on.
Contact us for a quotation.