When Does the Eternal Optimist Become a Realist?
Many Small Businesses are Faced with the Decision
I am the eternal optimist. The glass is always half full. However, the economy of the past several years has continued to take its toll on businesses around the world. Housing crisis, banking crisis, oil crisis all get the big news. What isn't getting much noise is the fact that micro-businesses are failing at a very fast rate. These businesses with under 100 employees - many under 10 employees - account for the majority of new businesses being created in 2011. Because of the focus of most government entities, they don't get much recognition or support. Governments want big number, accumulated they could reach the big numbers, but the bureaucracy usually can't see past the ability to control them.
Many small businesses begin with a business plan - maybe not a formal one, but certainly an idea as to what service or product it was going to provide, to whom, for what kind of profit. The business plan would have some idea as to start-up costs and operating costs, and what will be needed to make a profit. Maybe they knew someone who needed a supply of something and that would be the base to start with. Great, now we are off and running.
Then it happens. When business goes along every day pretty normally, orders come, supplies are bought, product is made and shipped, orders are billed, and money is made. Life is good. Then one day one of the normal customers doesn't order what they normally order. They drop off the screen. A little investigation and you find that they didn't go to a competitor, they went out of business. Hmmm, you say, probably poor management or didn't work as hard as you do at being on top of things. Then a very large customer that was your original base of business calls and explains that they are cutting back to 20% of what they normally need. That effectively cuts your companies sales by half. You are already down 7% from the small company but now you will see more than half of your company's sales dry up. Was that poor planning on your part? Was that not working as hard as you should have been?
It is amazing how the downturn of the economy in 2008-2009 compounded on itself over the next few years. I have been interviewing business owners asking the same questions since then. What I wanted to know from those who had abandoned their companies was how did you know it was time to stop? For those who had yet to close their doors I asked the same question but in a different manner - how have you been able to maintain a presence and what will it take for you to just say no - we are closed?
The first group varied in their answers but it came down to a few basic ideas. They knew it was time to stop when there was nothing left was the highest response by double. Wanting to stay in as the eternal optimist to keep their dream alive and hold off the inevitable. A few tell me that they had designed a safety net that would only allow them to fall so far - then that was it and they would have to move on, find a new direction. Then there were a few that had received calls from their creditors that told them - we will be there at 9:00 am and seize all of your assets, do not attempt to remove anything from the store - of course they showed up 5 minutes later. No one had a happy ending except one older guy I talked to that said he only spent what he earned and never a dime more so his shut-down was no harder for him than his start-up.
For those who were still in business, they explained it was tenuous at best for now. If any small hiccup were to occur, they may well be out of business. They had down-sized, right-sized, re-sized all they could. They had eliminated unjustifiable expenses, cut to the bone any variable cost and most employees were now being paid at least in part in stock. But no new business was coming fast. If something doesn't change soon - within months - they will be the next ones making the big decision.
I do work with a small group of people that have seen their numbers dwindle and profitability fall significantly - and their future looks similarly dismal - but they are committed to their work. The medical professionals do take and oath and many believe in what the agreed to do. It is this group that I see working many longer hours for less but still having something coming in.
2012 seems to be the consistent line of real hope for change from all those I interviewed with the exception of 3 minority companies I spoke with that are dependent upon government contracts - and they are flourishing. This too can change, my friends, this too can change.