Small Business Problems: Dealing with Capacity Limitations
The Bandwidth Problem
7:30 a.m. I wander into the convention center meeting room to check on tech setups and connections, including Wi-Fi for the Internet, to show some video examples during a conference session on marketing with video at 11:00 a.m. All good.
11:00 a.m. The Wi-Fi bandwidth has been exceeded for the convention center. I have zero connectivity to the Internet. My session collapsed in an instant and I had to ad lib for an hour. What a speaking nightmare!
For the next sessions in another city, the conference education coordinator and I decided that we'd devise presentations that didn't require Wi-Fi. Everything went smoother the next time.
Besides the lessons for public speaking and events, this story illustrates the problem of bandwidth—also known as capacity limitations—in business. And it's not just for technology. Like my 7:30 a.m. soundcheck before the swarms of attendees arrived, everything works perfectly when there are only a few customers. Then when growth occurs—blam!—system fail.
This issue can be particularly difficult for small business owners and entrepreneurs, even though it can signal a good problem to have... growth. In other cases, newbie businesses can completely underestimate their staffing, cash and resource bandwidth before they even open their doors. Then they are playing catch up from the moment they open up.
The Problem of Scale and The Crafter Fantasy
I've enjoyed doing needlework off and on since I was about 9 years old. Every once in a while over the years, I'll get bit by the "Could I make a living (or part of it) doing this?" bug. Then my business self gets a grip and The Crafter Fantasy is over instantly. Why?
While I enjoy these pursuits, there is no way I have the capacity (or talent) to make more than a few projects a week. Considering the market pricing, sales demand, administrative costs and profit margins I would need to make this a worthwhile pursuit, this fantasy cannot become reality.
The situation illustrates the capacity problem of a business that does not scale without significant investment. It's one that many crafters and artists fall into. They love what they do, but their "art" can take a long time to complete. Scaling up operations to keep up with demand is almost impossible without hiring labor (since working faster and longer is not an option) or investing in equipment to automate operations (which could destroy the "art" part).
The flip side is that these capacity limitations also limit how much money can be made. If a small business only has the bandwidth to complete one to a few projects per week, then those projects better be high paying ones to enable them to pay their bills... and themselves.
How Dog Pee Affects My Company's Bandwidth
Sometimes capacity limitations in a small business can be caused by forces other than those in the business. Care of children, parents, relatives, spouses or even pets can limit the time and energy bandwidth of a small business owner.
At my house, one of my dogs has bladder issues that come and go throughout the year as the seasons change. Worst part is that she often falls asleep and doesn't realize she needs to pee. So I have to be pretty diligent about making sure she's outside several times a day.
Using doggie diapers would be challenging since she and her dog pal would "repurpose" them as toys. Plus, she's never been crated after she reached adult age and wants to be with her dog buddy. Crating would cause her additional stress and anxiety since her problem is not behavioral, it's physical.
Since other than this issue, she's a healthy dog, I just have to be diligent about letting her out every few hours. As you can imagine, this puts me on a virtual "leash," limiting time away from the home office to a few hours unless I have another caregiver available. But hiring petsitters on a continuing basis can get pricey over time.
What to do? Schedule the care AND business hours! Similar to my email management system, I keep regular business hours during the work week, working in a dog care routine that helps preserve my precious bandwidth while preventing additional work from dog accidents.
Assessing and Dealing with Capacity Limitations
Here are some additional thoughts on learning to deal with the capacity limitations that plague many operations, especially small businesses and entrepreneurial ventures:
- Do a Time Study. Regardless of whether it is craft, service or product based, do a time study on how long it takes to create, sell and service what the company offers.
- Forecast Sales as Accurately as Possible. Forecasting sales and demand, especially in a new or expanding business can be tricky. However, without it, it is impossible to plan for capacity needs.
- Control Advertising to Help Control Demand. Investing in a big advertising spend might create a good deal of traffic and sales. That is usually a good thing. However, if the business does not have the capacity to handle the load, it will result in poor customer service and unhappy customers. Start with a smaller, realistic advertising rollout.
- Communicate the Limitations. Most small business people don't want to admit that they are incapable of handling any and all sales that come their way. But being honest with customers about limitations can help reduce customer complaints.
- Limit Offerings.This helps solve the "trying to be everything to everyone" problem. Restaurants are often guilty of offering too large a menu that is impossible to sustain on all operational levels. Whether in the restaurant business or not, limit the "menu" of products and services to only those for which the company has capacity and competitive advantage.
- Consider Alternative Offerings that Do Scale. If a company has a limited product or service portfolio to offer—even a one-trick pony—seeking out alternative streams of income that can scale for minimal investment can help keep the company doing what it loves while still building its brand. Going back to my crafter fantasy, instead of just offering completed works, I could begin designing, publishing and selling original patterns or instruction materials. Especially if these are offered electronically or as a print-on-demand basis, there is less chance of running into capacity or inventory issues.
Disclaimer: Any examples used are for illustrative purposes only and do not suggest affiliation or endorsement. The author/publisher has used best efforts in preparation of this article. No representations or warranties for its contents, either expressed or implied, are offered or allowed and all parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice, strategies and recommendations presented herein may not be suitable for you, your situation or business. Consult with a professional adviser where and when appropriate. The author/publisher shall not be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential, or other damages. So by reading and using this information, you accept this risk.
© 2014 Heidi Thorne