Small businesses usually find themselves being disadvantaged compared to medium or large businesses, because they do not have the resources available. The owner/operator is required to wear a range of different caps, which has a range of negative impact on the business. The business is managing the owner/operator, which means that the strategic perspective is lost and as a result the business is not able to move forward. Now let us have a closer look at this cause and effect.

The business is managing the owner/operator

When there are 117 different things to do in the business every day but there is only a few people (or one person) to do the tasks, some things are not done very well or not done at all. As a result the owner/operator is working like a firefighter putting out the fires as they appear, rather than prevent the fires to start in the first place. This becomes a viscous circle, which leads to the next point

The strategic perspective is lost

During the working hours the owner/operator is focusing on the operational tasks, and it is hard to take a few steps back and look at the business from an objective perspective As a result the, the business owner does the same thing day after day, week after week and so on. Unless the owner/operator has an active supporting network to step in and provide guidance, the owner will keep making the same mistakes and end up the same place that many before has ended.

Get an advisory board

The solution is to establish a formal or informal advisor board. An advisory board should consist of a group of experts of their chosen field. It can be private friends (though this can include some complications and as such is not advised). An alternative to an advisory board is finding a business coach or even better a business mentor. They all have in common the fact they do not work directly within the business and can see what is going on and help managing the business. Once an advisor has been identified, it is important to identify the core business functions and analyse if certain activities can be fulfilled more effectively, and maybe even outsource some of these activities.

Outsourcing

Outsourcing is a great tool to manage the business with, in particularly if the owner keeps attending fires. Outsourcing simply means that someone else is a called in as a hired gun to do some of business activities, in particularly the activities that does not contribute to the business profit. One such thing is bookkeeping and accounts, which is very time consuming, but is not a core business function (unless you are a bookkeeper). When outsourcing the bookkeeping function to someone else, it is very important that the bookkeeper not only does the simple bookkeeping tasks, but also provides the owner with the proper reporting tools that the owner need to manage the business.

The bookkeeper should be able to provide the owner with the following reporting tools:

Profit & Loss
Balance Sheet
Cashflow report.

If you do not understand how to read these reports, ask your bookkeeper to explain to you what it means. If your bookkeeper cannot explain this to you, it is probably best to find a new bookkeeper. Your accountant can also help you explaining what indicators to look out for, but the accountant usually charges a whole lot more than the bookkeeper.

About the Author

Rasmus Nielsen has specialised in CRM and outsourcing for several years and been consulting to various companies in Denmark and Australia on the topic. Rasmus also holds a M.Sc. International Business Economics and is a Director of Smart Boss, an Australian Bookkeeping Service for Small Businesses.