Ray Moore No Comments

In the life of every small or medium sized business (SME) there will be events that the owner has not encountered before.

My SME experience didn't ready me for this!Here's a quick look at five of the common one-off business events where relying on past experience may jeopardise the future of an SME.

I regularly speak to SME owners who have successfully built their business over 10, 20, 30 or 40 years.

Rightly proud of their success they feel that they have seen it all and can rely on their experience to successfully face the future.

Typical responses from SME owners are:

“We have been really successful to date, so we must be doing things right”

“I’ve got 25 years’ experience, so I know what I’m doing.”

Reliance on experience can create a dangerous Business Comfort Zone (BCZ) which blinds the owner to possible dangers as well as opportunities. The BCZ creates a ‘wait and see' approach leading to reactive knee-jerk responses rather than a proactive, considered approach to face these new events.

How, when and what the owner’s strategic response is, will have a significant impact on the future of all the business’s stakeholders.

1. SME Succession

The most common unplanned event for established SME is succession. A typical response is “I don’t have (want) to worry about that yet.” However, in every business there will come a point when the transition of leadership/ ownership will have to be faced.

Succession happens in every business. It should be a planned process rather than a disruptive event. For most SMEs this will occur only once in a lifetime and is not previously experienced by the existing ownership.

Way outside that BCZ.

But it will happen. Guaranteed!

It will either be to the next generation (in a family business) or by sale to a third party/management or by The Official Receiver!

2. Sale of SME

Similarly, an approach by a company interested in purchasing the business can be totally unexpected.

The approach is either rebutted or the opportunity wasted as the business is not ready for sale. Once again for most business owners this may be a once in a lifetime opportunity and not experienced before and outside that BCZ.

The strategy of building a business that is always ready for sale has just not been considered as an option.

3. SME Increased growth rates

The BCZ lulls all concerned into expecting steady year-on-year growth based on regular business from loyal customers. Opportunities to enter new markets or new products which can result in off trend growth may be ignored or squandered.

The experience has been to add resources in response to sales. A strategy of playing catch up and relying on the goodwill of existing customers has worked but there will come a point where it is necessary to ‘Set Out the Stall’ to sustain the growth. (See point four, below).

4. Transition to a medium-sized business

In my book ‘Can Your Business Step Up to Growth Challenge?’ I focus on the challenges of a growing business transitioning from a small to a medium sized business. The reactive rules of running a small business when applied to a medium business will result in stress as the four drivers, Time, Team, Money and Delivery are forced out of balance.

Reliance on experience i.e. working harder or throwing resources to rebalance the drivers will not resolve the stress in the long term and will only magnify the issues in the short term.

5. Disruption in the market

How to handle a major disruptor in the market by its nature cannot be viewed through the experience filter. The change will have a fundamental impact on the trading of the company and past solutions will not apply.

The owner must apply a different way of thinking to deal with the new market conditions. What worked before may not work in the future.

These five examples are by no means every possible significant events when new thinking needs to be applied rather than relying on experience.

Relying on hard won experience is great for handling similar situations, but will not help in scenarios way outside the BCZ.

It’s only when you truly understand your experience can you begin to leverage it’s power for the benefit of all.

What significant events have you faced in your business that your experience had not been sufficient to handle the situation?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.