Why do large businesses generally succeed while small businesses fail?
We have all heard the statistics that 75% of small businesses fail within the first five years of operation. This is not because there is not a demand for the product; it is due to the lack of infrastructure and discipline. A large part of discipline is accountability.
For over two decades a large part of my role has been working with businesses to keep business owners accountable to their plan. Not because they do not have the ability to keep themselves accountable, it is because they generally do not have the discipline. Like all great athletes, they need a great coach.
For a large business to survive the right levels of accountability must be in place. Internally, in the organization, there is hierarchical structure. This is also generally true for small business. However, in a large business the CEO is kept accountable by the directors, and the board of directors is kept accountable by the chairman. It is the board’s responsibility to act on behalf of the shareholders and make all decisions for the best interests of the shareholders.
By contrast the small business owner has to wear multiple hats. They are usually the CEO, the director, the chairman and the shareholder. This is largely where things go pear shape. It is not effective, efficient or productive for any person to have a diverse range of skill set let alone the time and the mental discipline to continually keep themselves accountable to themselves. It is extremely difficult to be clear thinking enough to make decisions and obtain perspective when you are working in the business.
Some business owners intuitively understand this issue and reach out for assistance, whilst others wait for this deficiency in their model to be pointed out. The best way to correct this deficiency is to start thinking and acting like a large business.
The best starting point is to commence monthly meetings and invite a trusted adviser on board. These meetings do not have to be formal and stuffy like the vision we have of board meetings. They can be as informal as you like, just as long as you cover the relevant information to be able to make informed decisions. I have spent plenty of time in pubs, cafes and restaurants with business owners on a monthly basis discussing and making decisions about their business.
A monthly meeting requires you to get out of the day-to-day operational mode of thinking to start to think more strategically about your business. The old analogy of working on rather than in your business is as relevant today as it has been for centuries.
Who is keeping you accountable to your plan?
If you are not doing a good job then find someone who can. When selecting the right people to keep yourself accountable you need to consider the following:
- Do I respect this person and consider what he/she has to say regardless if I agree?
- Do I trust this person has the best interests of the business and ultimately my best interest at heart?
- Does this person have the skill set that I do not have to balance up my deficiencies?
It is important to surround yourself with people that have the same values as you but think differently. All too many times I see people select, mentors, coaches, chairs of boards and advisors that think the same as they do. They select these people because generally they will agree.
Life is a lot easier and has less conflict when the people around you agree with you. We are wired in a fashion to gravitate towards people that are like us. Therefore it takes a strong will to succeed to engage a person that you disagree with, especially when you are paying this person.
If you select the right person or persons, this can be the difference between success and mediocrity or, worse, failure.
Our tip: Build large business infrastructure with monthly board-style meetings and invite advisers that have the same values as you but think differently.