Management Team: Cast Down Your Bucket

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July 28, 2016
photo of metal buckets

It’s lonely at the top. Small business owners often lament the narrowness of their management benches. They cast an envious eye upon their corporate brethren who seemingly luxuriate in the midst of a team of managers. The managers oversee a variety of specialties including sales, human resources, and production to name a few. There may even be attorneys and auditors on retainer.

In contrast, many small business owners believe that their absence of middle-managers leaves all management on their shoulders. This belief is unfounded. Small business owners have unrecognized management resources; they just do not see them as potential team members. The purpose of this brief article is to help owners recognize and utilize these resources. It does not have to be lonely at the top. It’s a matter of perception.

Vendors are often overlooked as a management resource. Take, for example, the representative of the food supplier for a small restaurant. The representative visits kitchens every working day. They know the landscape. The supplier can help the owner with food (ingredient) costs. Some suppliers even have software available to calculate the cost of all the ingredients of, say, a simple hamburger. The representative may be able to help with portion size and portion control. They probably know how other eateries are handling this issue.

But, the restaurant owner needs to ask the representative for help. The restaurant owner can rarely leave his/her business. The sales representative can be the owner’s eyes and ears. The food supplier wants to see the owner succeed and grow, as that is good for the supplier’s business. But, to repeat, the owner has to ask.

Some small businesses have an accountant, or more likely, a tax preparer. An accountant is surely the preferable resource but tax preparers also have knowledge. The preparers likely do hundreds of returns in a tax season. They are probably unable to help with ratio analysis but they see enough returns to identify trends. It’s unlikely, however, that a business’ tax preparer will volunteer insights.

As in the case of the vendors, the small business owner needs to ask questions: how does the owner’s cost of goods sold (COGS) compare to other similar businesses serviced by the preparer? How about labor costs, are they in the ballpark? Lastly, how does the owner’s net income/sales stack up to other similar businesses?

Small businesses are occasionally debt free. Most, however, have debt and consequently have a lender. The lender is likely an unrecognized resource. Granted, lenders are cautious about giving advice for liability reasons and will couch their advice as “something you may wish to consider.” Lenders review the financial statements for a lot of businesses. They understand why some businesses merely survive while others thrive.

Small business owners are well advised to cultivate their banking relationships. The owner should invite the lender to visit the business and follow up with periodic financial statements. In short, get the lender to know the strengths and weaknesses of the business. The lender’s knowledge of the business will position her to make better suggestions to the business owner.

Each type of business will have its own array of potential resources. A dairy farmer may have a veterinarian, feed dealer, lender, and nutritionist. The owner of a hair salon would obviously have a different list of potential resources.

One does not need to be lonely at the top. First make a list of one’s service/product providers. Next, add notes next to the name of each provider that describe the particular management advice they could provide.  Lastly, cultivate these relationships. In this way, as yet unrecognized management resources will become your team – your strategic partners. 

- by Stewart Gates, SBDC North Country Business Advisor