How to Solve Common Business Problems

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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As a small business owner, you are a natural optimist and risk-taker. But, have you crossed the line that separates optimism from delusion?

Being hopeful is easy — in the short-term. Wishing for less demanding customers, more motivated employees, and more cash in the bank requires far less intellectual work and emotional effort than making an honest assessment of your business.

Opening your eyes to issues you would rather ignore and admitting mistakes can be painful. Doing so, however, allows you to move directly to solving problems and creating the business of your dreams.

Customers

Do you think your customers have out-of-control expectations? Dismiss the idea that dissatisfied customers are outliers.

Scrutinize Complaints

Pinpoint who is complaining (new accounts? long-time customers? everyone in your southwest region?) and what their concerns are. Look for patterns of customer frustration. Look hard for common threads if the issues seem dispersed.

Deal with sources of the complaints, which may mean correcting the behavior of an offending employee, reorganizing a dysfunctional department, or educating your entire team on the right way to promote a new line to existing customers.

Analyze Returns

Check product descriptions and images for accuracy. Look at service guarantees to determine whether they are consistent with industry standards. Discern if marketing promises are realistic or overstated.

Adjustments may be straightforward. A hastily prepared, misleading product description can be rewritten to more accurately convey attributes relevant to consumers. A problematic merchandise category can be discontinued and replaced with a more profitable line. Customers can be qualified to make sure that service packages are appropriate for their needs.

Keep Promises

Find out whether your company is adhering to its schedules, delivery commitments, and lead times as communicated to customers. Calculate the percentage of on-time deliveries.

Clarify the reasons for late deliveries. See whether jobs are scheduled according to capacity, throughput times, and material availability. Ascertain if pressure from customers dictate schedule changes. Decide whether to prioritize orders from certain customers based on profit margin, volume, or other factors. Get an understanding of how promise dates are determined. Establish rules for creating, communicating, monitoring, and verifying compliance with schedules.

Employees

Do you have self-centered employees who are uninterested in innovation, customer engagement, and higher levels of profitability? Stop giving them slack.

Perceive Shortcomings 

Think about manipulation in the past, times that defensiveness overruled reason, and other troubling moments. These interactions represent the core of an employee’s personality, not the rough edges.

When conflict arises, be clear about your position and reject any push-back. Communicate that you will make decisions by examining all aspects of a situation, not rely solely on information that one employee shares. Let employees know that you realize that mistakes will happen but cover-ups and denials are unacceptable.

Touch Base 

Uncover fears of a new technology application, heavier workloads, or loss of control over a certain work area. Discern lack of understanding in your business model and vision.

Go ahead and implement sure-fire ideas. Remember that employee buy-in is useful but not essential. Remove employees who may sabotage new tactics, products, etc. from certain projects or take them out of the workplace.

Observe Work Habits 

Note attendance and productivity, questioning employee dedication if problems persist over a long period of time. Set goals and describe habits that will achieve objectives. Monitor results to confirm that employees are focusing on your business, not dwelling on their problems or pursuing their personal interests.

Financials

Is your business operating at full capacity but failing to generate cash? Get a handle on what is clogging cash flow.

Calculate Profitability 

Design and institute a method to compute profits by category (such as customer account, market segment, product line, service offering, or project). Review pricing structures, and capture and assign costs through methods such as project-based accounting.

Unprofitable categories will become apparent. Clarifying your next step will be more difficult. Obvious actions include raising prices, cutting expenses, and eliminating lower profit items. A more complex approach will involve reinvigorating your brand or developing proprietary products to command premium prices.

Check Your Infrastructure 

The cost of pricey office space, well-credentialed consultants, and full-featured technology systems can outweigh the benefits of high profit margins, heavily negotiated rates with vendors, and otherwise frugal spending habits.

Decide what is essential to running your business. Review contractual commitments with an eye toward canceling certain agreements. Recognize needs that have changed and revise spending accordingly.

Assess Cash Flow 

Customers want to pay later than expected and vendors demand faster payment. Valued customers have been allowed to delay payments. Vendors with high-demand items have asked for payment on delivery. The squeeze means that your business rarely has the cash needed to operate smoothly.

Investigate new credit and payment options. Revise credit terms. Update your payment acceptance methods so that customers can easily pay when your bill is presented. Talk with vendors about ways to better organize product shipments and service deliveries, more closely aligned with company needs and customer payments.

Problems Have Solutions

These scenarios are a sampling of predicaments that may be present in your business. Together, they are overwhelming. Individually, they can be tackled. Solving just one problem is liberating, giving you the confidence, insight, and skills to deal with the next set of difficulties. Greater clarity will allow you to manage your business for the results you want.