The managerial incompetence of SMEs and the pitfalls to be avoided

Have you ever wondered why most businesses fail? In the UK, on ​​average, two thirds of all businesses fail within 3 years. This is a horrible statistic. Most business failures tend to blame everyone else but themselves for their misfortune, says Robert Craven, a personal favorite and marketing expert, and a leading authority on business advice for the UK SME sector. . Independent UK research in recent years points to two key factors: poor marketing and a failure in financial management. Criticisms of managerial incompetence suggest to me a weakness in the SME management decision-making process and follow-up: taking action on the decisions made. What action can you take as a business owner when sales are plummeting or profits are plummeting and the pressure is high? A common consensus among management consultants, business mentors, and business coaches is that the temptation to bury your head in the sand is so strong in many SMBs that they cannot make that change. So what can we do to avoid these management pitfalls?

Proposals by leading experts have suggested that SMEs need an ‘early warning system’. Is this like a fire drill, a ‘what to do in case of fire’? This seems logical, and the Balanced Scorecard (Kaplan) is an excellent system for SMBs to monitor their business performance. The concept was developed and expanded in the US, in the late 1980s and early 1990s, and provides a unique management report that gives management an up-to-date position on business performance at any time, anywhere. based on key performance indicators (KPIs). . Many UK corporate companies implemented this system to good effect, most notably Halifax in its meteoric rise in the 1990s, which led to its merger with the Bank of Scotland (HBOS). The scorecard can be used to track any aspect of the business, from money-making activities (daily revenue, transaction value per customer, new customer volume, value of refunds and returns, customer complaints) to other critical success factors such as productivity (lead times, unit costs, scrap, unit volumes) internal business processes, human resources (staff attendance, including staff morale), finances (creditors, debtors, fuel costs), etc.

Most importantly, the scorecard is designed by management themselves and reports on the key performance indicators they have chosen. Microsoft has now tried to incorporate the scorecard style into its own finance package for SMBs. Even a one or two man operation would certainly benefit from a financial specialist helping to set up the system at the start or at the time of review. Where is a good place to get high-quality financial experience at a reasonable price? Your local Regional Development Agency (RDA) has a registry and new services such as Business Service Finder. I’ve heard it said that marketing is the least understood but most important skill in business. Since it is impossible to have all the management skills and experience “in-house” in an SME, it pays to outsource the work. In fact, most business owners fail to delegate at their cost (plus managerial incompetence). Business planning and strategy implementation are such key activities that experience is extremely useful and payback is many times the initial investment.

I’ve personally had conversations with business leaders who seem to think that marketing is simply about the color of the categories in their brochure, yet they run a major business. One of the best definitions of marketing comes again from Robert Craven, who wisely commented: “Marketing is the battle for the mind of the consumer, not a battle for the product.” It doesn’t mention the color of a brochure or the color of a small product item, and let’s never forget the top reasons for business failure.

A good marketer would aim to empower management to follow the direction they set out in and introduce efficient systems to stay on track. Ignoring the Internet today is commercial suicide (See my Ezine article “3 Key Aspects of a Business Website…”). E-commerce and the ability to generate income from the Internet is a Critical Success Factor (CRS). In this recent global recession, there is no telling how long it will last and what effect it will have on your industry and business. Acquiring new customers is an ongoing process that goes hand in hand with improving performance. The Internet is sustaining most of the businesses that survive right now. The time is now to review the performance of your eCommerce and eMarketing strategy, and it is best to consult an external specialist consultant to help you take an objective point of view and consider the best options and solutions.