The managerial incompetence of SMEs and the pitfalls to avoid

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 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 research from the UK in recent years points to two key factors: poor marketing and failing financial management. Criticisms of managerial incompetence suggest to me a weakness in the SME management decision-making process and in monitoring: taking action on decisions made. What action can you take as a business owner when sales plummet or profits plummet and the pressure is high? A common consensus among management consultants, business mentors, and business coaches is that the temptation to bury one’s head in the sand is so strong in many SMBs that they can’t 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 SMEs 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, in function of key performance indicators (KPI). . Many UK corporate companies implemented this system to good effect, most notably Halifax in its meteoric rise in the 1990s, leading to its merger with the Bank of Scotland (HBOS). The dashboard can be used to track any aspect of the business, from money-generating activities (daily revenue, transaction value per customer, volume of new customers, 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 dashboard is designed by management itself and reports on the key performance indicators they have chosen. Microsoft has now tried to incorporate the scorecard style into its own financial package for SMEs. Even a one or two man operation would certainly benefit from a financial specialist to help set up the system at the beginning or at the time of review. Where is a good place to get high quality but reasonably priced financial expertise? Your local Regional Development Agency (RDA) has a registry and new services like Business Service Finder. I’ve heard 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 is profitable to outsource the work. In fact, most business owners fail to delegate at their expense (plus managerial incompetence). Business planning and strategy implementation are such key activities that experience is extremely helpful 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, but who 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 of 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 main reasons for business failure.

A good marketer would aim to empower management to follow the direction they started in and introduce efficient systems to stay on track. Ignoring the Internet today is business suicide (See my Ezine article “3 Key Aspects of a Business Website…”). Electronic 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 have an objective point of view and consider the best options and solutions.