Management Memos

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December 2018
 

December 2018 Growth and Success

A Year's End Reflection

Hard work is not enough. Some SME's prosper while others fail - yet all work hard. Can we really know what makes the difference?


The Australian Centre for Business Growth has undertaken a study which identified some of the reasons SMEs fail in the Australian environment. The data came from people who have experienced the pain and destruction of a small or medium enterprise that had failed. Interestingly, it was 22% of respondents who had experienced this failure. Of course, this means that over three quarters of all the SME's surveyed just kept right on going and going.

But were they really being 'successful'?

Skills Needed in Managing

To the extent that the research was conducted by a school whose programs are aimed at building management leadership skills, it is not surprising that a lack of leadership in its many guises, is seen as the key factor.

Cash Flow

Payments - Important to Cash Flow

It is beyond question that the survey results show that it's not a lack of technical knowledge or expertise that causes business failure.  And it's not great technical knowledge that brings success. From thirty five years of consulting to SMEs, it is clear that all SME operators are skilled, or highly skilled, in their product or service field

It is a failure in one or more of the facets of management that sees some businesses come crashing down. Less spectacularly for others, it simply stunts their growth - keeping them from growing like they should.

Which leads a thoughtful SME operator to ask the question "What more must I do in management terms, to really succeed?" By looking at the causes of failure in those enterprises that didn't make it, thoughtful people can see some of the risk factors for the businesses SMEs are running today.

Growth Is Key To Success

Here is a major sticking point for many operators. After looking at all the facts, it's clear that the key to success is growth. That can be tough to contemplate when your premises are tight, the staff are limited, and there seems to be only few opportunities to do more business. It's just at that point that you really must find a way to grow!

Growth is key to success

Grow - or Fail!

A key point is moving your business from the 'establishment phase' into the 'growth phase'. Its easy to stay in the establishment phase because there are always issues, and it is easy to think "it will be just fine when I've solved this one thing".

You could stay this way forever! But you shouldn't.

Breaking out of this mindset is important for future strong growth, but it's also a danger. You can't just charge ahead and follow your instinct.

You need training and expertise to do this well. There is the example of a perfect service technician who was made a director of the company to help drive growth in the service department. Neither the employer nor the service tech understood what this means, and the result was a disaster. They lost a good employee - and paid $100K to do it!

Several other stories like this are listed in our long archive of management disasters in client organisations.

Management Is A Complex Challenge

Dr Jana Matthews, director of the Centre, said a common issue was managers not understanding their roles and responsibilities as company leaders. "People are not born knowing how to drive a car, yet millions have learned. People are not born knowing how to drive company growth, but hundreds of managers have learned", she said. Many more can learn, if they are given an opportunity.

What is a manager?

A Manager is all This and More

In other words, management needs to be learned.

"Leaders need to plan and set the company's direction, communicate, build an executive team, create a high performance culture of execution, manage and optimise corporate resources - including employees and financial resources, customers, suppliers, vendors, advisors, and financiers," Matthews said.

"They need to ensure good governance and alignment, and create a learning organisation, and when these leaders do not understand or fulfil such responsibilities, companies fail to grow, and sometimes fail completely," Matthews added. "Small and medium companies are incredibly important to the health and well-being of this nation.

Too many of Australia's companies are failing because CEOs [managers] or founders simply do not understand their job, don't know what to do, don't know when to do it, or why", she continued.

So as we head into the festive season, where there just might be a chance to reflect on some these fundamentals of your business, consider these questions:

Planning - Good? or not so?

Market Research - have you done any?

Selling skills - Can you persuade that customer to put their hand in their pocket and give you your money?

Financial management - Do you understand cash flow, stock turn, and working capital?

Externalities - What are the possible impacts of fire, drought, interest rate changes, regulations, global trends, and what are you strategies for risk mitigation?

Governance structure - How are people with the relevant financial and legal insights deployed to keep your business safe and strong?

Reflect on some of these issues that hold the key to future growth. Or ignore them - then they will hold the key to future failure.

These 'Externalities' will affect you!

Dust storm

Drought and Dust Storms

Wall Street

Collapse in Trade

CBD Flood

Storm and Flood

 

 

 


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Any advice, information or comment contained in this document is general in nature, and should not be relied on as the basis for any specific commercial, business, employment, or financial decision. Specific advice should always be obtained for each individual circumstance. Accordingly any advice, information or comment contained herein is for general guidance only.