There are three unavoidable operational risks common to all businesses if they survive and grow. These risks are predictable and addressable, so long as the owner knows what they are looking for. Everything else is “just management.”
Risk 1: Managing the growth exceeds the owner’s experience and knowledge
When company growth out paces the owner’s experience, the company will suffer. Growth is always the goal, but when an organization grows faster than anticipated, the business is put in the position of either turning down profits or rapidly expanding. Turning down business is an alien thought to most business owners, so they expand. Hiring new employees can be difficult. What if the new employees don’t mesh with the rest of the team? What if they are not as skilled as their resume indicates? Ideally, the business owners will leverage standardized and highly clear-sighted hiring practices to ensure that they avoid the Three Biggest Hiring Mistakes.
If the owner decides that they don’t need to grow their team, they must be aware of the additional strain that will be placed on existing employees. If you work them harder, then you must have a strategy to alleviate their frustration and make them feel as though their additional work is appreciated. Keep the 5 Primary Motivators in mind when working with employees who are stretched thin, as these are the times when a motivational misstep could be the most detrimental.
The real issue arises when the business owner doesn’t know how to manage success. It is an interesting paradox; businesses can do so well that they fail.
When this happens the owner has two options: learn and adapt or bring in outside help.
Taking classes and reading books is the slower of the two options, if the business is hemorrhaging money and in danger of going under then the business should bring in outside help.
Risk 2: Change in ownership or upper management
Many businesses fail when they change ownership because:
– The new owner doesn’t have the correct training or knowledge.
– The old owner never really hands over control and continues to try to run it.
– There are no stable or sustainable procedures in place.
– The old owner had the operations in his head or in books that are indecipherable.
– The new partners are unable to co-manage
If you integrate new leadership into existing structures before they take the reins, they will have time to adapt to existing systems and procedures. This will lessen the shock that comes with a managerial transition.
Risk 3: Not generating enough revenue to support the overhead
When the expenses of the business are more than the money that is brought in, the businesses will go under. You can deal with this risk by ensuring that the business has a strong revenue stream, this means evaluating the effectiveness of the sales team and the job costing/bidding structure. Determine where money is being left on the table, then stop leaving it there.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: