Managing a small business, you face challenges that are unique to the smaller entity. Restrictions are placed upon it that escape larger entities and in turn you need to apply more focused and environmentally conducive solutions that are specific to the mechanics of the smaller entity.

Having worked with and for small business owners for many years, I have identified three of the many challenges the smaller entity faces. I am a big believer that if the small entity addresses these three challenges in every decision they are confronted with, they will in turn build a more stable and viable business.

Business owners and managers face countless challenges on a daily and sometimes a moment to moment basis and at times may wonder if you’ll ever get to the end of them.

However, managing a business is all about problem solving.

We go into business to solve a particular problem we have identified and we create a unique solution or product to solve it. We decide on how to market our offer, how to distribute it, how to finance it. And it doesn’t end there.

As we begin trading, we find ourselves continuing to solve one problem after another. How much should we be spending on advertising? What are our competitors doing? Is it time to recruit more staff? How much stock do we need to serve our customers promptly? Is our product continuing to meet our quality requirements? Are we invoicing all of our customer’s sales and is this prompt enough? Do we have enough cash for all of this? Are there enough beans for the coffee machine? And this is when everything is going right.

The current business environment, with the height of uncertainty has only accentuated this even more.

Business is a problem-solving process that can push you too your limits and beyond.

In order to preserve your wellbeing and stay across the demands of running a business you need to understand the core focus of the challenges you face. These form the basis of the three challenges I have identified the small business face. The key is to manage them well to shore up the chances of your businesses being successful.

The first challenge is TIME MANAGEMENT.

Time is one your business’ most precious resource. As business owners you need to utilise time in its best capacity if you want your business to be successful.

No-body has any time. Even in 2020 when are freedom have been restricted many of us still found ourselves as busy as we were before. Everyone, from business owners, workers, to Mums and Dads are time poor.

However, time poor takes on a whole different meaning for the small business owner.

• You work 24/7,
• Are in a constant pattern of migrating from one problem to the next, and
• you are always thinking and worrying about your business.

The momentum of your business can take on a life of its own, pushing and driving you through one day after another and if you are not careful you can find yourself in a place a long way from your intended vision. This is particularly the case when business activity increases significantly without warning. It is very easy to fall into the trap of being driven by the demands of your business rather than you driving it.

Time restraints can even occur in the situation where the activity of your business may have shrunk or is in some instances even stopped. It takes a lot of energy to pivot your business at a moment’s notice, something businesses have had to do not once or twice but in some instances several times in order to accommodate the ever-changing boundaries in our current environment.   

Time management is essential if your business is going to succeed today or at any time during the life of your business. The key is to delegate and automate wherever possible so that as business owner, you are managing by exception.

The second challenge is INTELLECTUAL CAPITAL.

What is intellectual capital?

The Cambridge English dictionary defines intellectual capital as the value of all the knowledge and ideas of people in an organisation.

There are four components:

• Intellectual property – which incorporates patents, trademarks, copy write and is associated mostly with the branding of your business.
• Structural capital – centers on how you do business and incorporates your business’ culture, business process, business systems, data, documents, media and applications of your business. It includes your trade secrets and how you do business differently to your competitors.
• Human Capital – is often referred to as human resources and it incorporates knowledge, know-how, capabilities and the creativity of your employees.
• Relationship Capital – incorporates the relationships you have with your customers, suppliers, employees, third-party institutions and anyone outside of but associated with your business.

Intellectual capital is not physical, but we know it exists and is often referred to being an intangible asset. We know that it is an asset because we used each of these four elements to generate revenue in our business.

Small business has no problem with creating intellectual capital. In fact small business is very good at creating intellectual capital. The smaller entity more often than not serves niche markets, and is able to cater to individual customer specifications and at times unusual requests.

However, I have witnessed some small business’ struggle with identifying the true essence of some of these four intellectual capital components and many that have difficulty capturing it.

One common thread of the last three components is that they are dependent upon human beings. And human beings move in and out of your business, whether it is you, the business owner, or your staff. Capturing your small business’ intellectual capital can be as problematic for the small business as staff retention.

Many small business owners are inherently the essence of their business. When they are removed from it there is often not much of the business left.

Whilst in the capability of working remotely is easier than ever before and we can give the impression we are there running our businesses even from afar, in reality if we are not there to deal with daily issues our businesses are impacted. Whether you are laid down with a health issue or had to step back from your business to deal with a family crisis, or even want to go on an extended trip, you want to ensue your business will continue to operate as if you were still present.

A similar situation occurs when invaluable employees resign.

It is hard enough for small businesses to attract highly skilled and accountable employees and when you do you want to ensure that they stay with you. However, with the staff turnover rate at around two years, eventually your prize employee may decide to move on and when they do, there is the danger that they take intellectual capital of your business with them.

While the large entities generally put measures into place to ensure they capture what they can of their intellectual capital, so often I have witnessed it not being a consideration in the small business. As a result their businesses are impacted and quite severely when the business owner or valuable employees leave the business temporarily or for good.

Every small business owner should go through the exercise of identifying the components of their intellectual capital and formulating systems and strategies to capture it. When intellectual capital is embedded in the fabric of your business’ structure and culture, it is not so dependent upon individuals within their business.

The third challenge CASH MANAGEMENT.

Without cash a business cannot breathe. It can have difficulty growing, paying day to day bills and even struggle to reward you, the business owner, with a return for all of your hard work managing your business.

We have all witnessed, and some of us felt the impact of, not having enough cash to keep our businesses running. Even when a business is running at capacity they still can experience cash flow issues and not have enough cash in their bank account to settle current obligations. 

Business owners are led to believe that profits are “the be all and end all” of a financially viable business. However, profits are only one third of the full scope of your business finances.

While a business can be enjoying high levels of profitability, they can still be strapped for cash, unable to meet their obligations and have little or no money in their bank account.

However, when a business focuses on generating cash inflows that are in excess of cash outflows on a regular basis and align the two so that they work together, your business will not only generate cash but is ensured of profitability and financial stability.

There are generally two types of cash problems the small business can experience.

1. Business activity generates very good cash inflows however cash is trapped in their business processes and out of reach of their bank account.
2. The second is chronic and occurs when your business activity is not generating enough cash inflow to cover cash outflows. Chronic cash issues will require strategic changes to the way you are managing your business and may involve critical changes to the structure of your business model.

It is not enough to generate cash inflows to your business. You need to develop and implement cash management strategies that improve the management of the cash your business can generate and maximize the return on your investment.

By understanding how money flows in and out of your business will empower you to make better decisions that don’t compromise you financially.

The key is to keep your accounting up to-date and use the information it generates to educate you on how cash flows through your entity. With this knowledge you can manage and achieve profitability and financial stability.

That brings us to the end of three challenges that small businesses face.

We spoke of time and the need to manage it so that you are giving your business quality time rather than quantity. We identified the need to isolate the intellectual capital that is specific to your business and the need to develop systems and strategies to capture it. The third challenge is Cash Management. It is the key to managing your business’ financial stability, not only profits.

If you make every decision of your business taking these three elements into account, you will not only improve your management but your business will reward you.

All products and solutions I offer in my business, Zephyr Management Solutions, aim to address these three challenges. In turn I aim to provide business owners with clarity, empowerment and well-being in relation to managing their business finances.

In the meantime, keep your businesses humming, the world economy needs it. Confront the challenges you are facing head on, work the problem and look for the opportunity.

In all adversity there is always a lesson and an opportunity.

Written by Debra Cooper

Principal of Zephyr Management Solutions.