Applying Process Improvements For Small Businesses

It is no secret that small businesses in the United States play a huge role in the state of our economy. According to the Small Business Administration (SBA) Small businesses make up more than 99.7% of all employers and produce over half the nonfarm gross domestic product each year. With that said it stands to reason that the small business would significantly benefit from process improvements. In spite of the massive opportunity most small businesses are overlooked by the industry because they face unique challenges when it comes to process improvements.The dilemma small business face is a lack of resources (time and money) and specialized skills needed for most mainstream methodologies. In most cases they do not have the structure or the resources to support rigorous methodologies such as Six Sigma or Lean and most don’t have the expertise to use “simpler” methodologies such as CAP or Work-Out. But small businesses would unwise to simply stop their pursuit of implementing process improvement plans into their business strategies. You as a small business owner or manager can initiate a process improvement strategy that will assist your companies growth by simply, establishing a methodology and go after the low hanging fruit with little investment and basic business skills.The first step for a small business is to establish a methodology or system to address the needs of their business. No matter what the industry or business a consistent methodology is crucial to accomplishing goals. Although I am a certified Six Sigma Black Belt I often advise small companies to implement simple plans and simple tools address current needs. I have often used a methodology I call D.A.I.T.Discovery – Write down a list of your largest categories of expenses and charges, evaluate your margins and evaluate your cost and decide were you are compared to others.
Once you have established a financial number to each category you now have an effective project list.Attack – Select an area of opportunity and begin your attack plan. Brainstorm the constraints you face in reducing your costs or improving your margins. Get other together and brainstorm ways you can reduce or eliminate those constraints and what tasks you need to complete in order to achieve these results.Initiate – This step should be done within a couple weeks and is simply following through on your attack plan using an action item list.Track – Now is the time to sit back and see the fruit of your work. Evaluate the benefits financial or otherwise and celebrate with those who helped you achieve the results. If no results can be tracked then step back and create a new attack plan.By following these simple steps any company no matter the size can see great results by simply stepping back and “sharpening the axe” your company will be better positioned to grow and experience better profits for indefinite future.Remember that if you have never attempted to do any process improvements you should always go after the low hanging fruit first. The first few attempts for a company should be “no brainers.” This will allow you and your staff the opportunity to practice and make some mistakes and allow for the biggest improvements.Armed with the DAIT methodology small businesses can begin their experience with process improvement and move to more advanced methodologies that address customer needs with the additional resources gained from DAIT. The opportunity is substantial in both small and large businesses the impact of inefficiencies can make up 2/3rds of margins. While there are many factors that a business owner or managers can not control your efficiency and processes are completely within your control and you can be more successful using process improvements as a critical piece of your business strategy and plan.

Top 3 Reasons Small Businesses Fail

Before You Say “I Do”Before you say I do, before you make the investment, before you hang the sign, before you set up the company, there is something that you should know. Small businesses are similar to a marriage – no one goes into the venture thinking that it won’t work out. Yet a significant portion of small businesses fail. According to the Small Business Administration, as many as 30 percent of small business startups fail within the first two years of the honeymoon – and up to 50 percent within the next three years. Do the math and you’ll come up with a staggering 80 percent failure rate among small businesses within the first five years. The odds are stacked against you, but our business model is based entirely on helping small business owners maximize growth. To avoid the pitfalls that cause other businesses to fail, you’ve got to understand what business failure is, the reasons why small businesses fail and what it will take to be part of the remaining 20 percent that achieves success.Just like someone whose marriage has ended in divorce, failed small business owners often blame anyone but themselves. They look for factors outside their control as scapegoats for the downfall of their business endeavors. They blame the economy, the government, their partners or their employees, just to name a few. If you dig a little deeper, the real root of the problem can often be revealed in a lack of business acumen, inadequate resources or insufficient capital. Without exception, these issues are ultimately the responsibility of the small business owner.Lack of Business AcumenMaking the transition from an employee to a small business owner can be extremely difficult. The disciplines that you have developed as an employee are totally different than what you will need when you step into the owner’s shoes and start running the show. The reality is that many owners’ expertise lies in accounting, law, medicine or some other discipline unrelated to day-to-day operational concerns. Don’t assume that you can just open a business and find clients or patients lining up outside your door. It takes skill and experience to drive business your way. Identify the areas where you lack expertise and look for consultants, partners, professional services or employees to fill in the gaps.Inadequate ResourcesFor small business owners, relationships mean everything. The right relationships result in a strong foundation, but incompatible or incomplete teams translate to inadequate resources. What team resources can you leverage to balance your own strengths and weaknesses? Too often, new business owners attempt to do it all themselves. This strategy may work in a one-man operation for someone whose goal in life is to only work by himself, for himself. Unfortunately, it’s an ineffective strategy for running a full-scale business. Instead, you need the right team and the right advisors. One of the most powerful tools you can use to increase your chances of success is to learn where to turn to get the right resources to fit the needs of your business. That won’t necessarily mean consulting with your best friend or hiring a former co-worker. Your selection process should extend beyond friends and family. Looking for the lowest price may also not be the best decision-making criteria. The truth is you get what you pay for. Locating and utilizing the best resources possible is one of the keys that will differentiate your future between dissolution and success.Insufficient capitalThe number one reason why marriages fail is because of money issues, and small businesses are no different. The amount of capital available to you at the time you establish your new business is a critical determinant of the success or failure of your business. Simply put, your available capital is the sum of your cash, lines of credit or trade credit for the business. For most start-up businesses, the costs incurred within the first two years far outweigh income – except in the case of acquiring a business that provides income on day one.One of the largest and most common problems is muddying the line between business expenses and personal expenses. Separate your personal life from the business. Resist the temptation to remove cash from business accounts to satisfy a shortfall in your personal budget. While it’s true that the business should provide income to the owner, too-frequent personal withdrawals cause undue hardship. Plan withdrawals that are sufficient to maintain your household needs and stick to the plan.In order to flourish in business, you must be accountable to yourself, your employees, your family and your clients. You must be able to grow right along with the growth of your business. If, as a small business owner, you take the same “’til death do us part” commitment pledge taken by a newlywed, and commit to sticking it out through thick and thin, you will increase your chances for success. Don’t give in to the temptation to wander off and explore the next, newest thing. Focus and commit to your business and eliminate failure as an option.