The Small Business Skills Gap
For many years I’ve spoken about a skills gap with SME business owners in the area of marketing.
In today’s post I want to examine this issue a little more closely and cover some key areas where SME business owners need to lift their skills in order to be more successful and achieve their goals and dreams.
In surveying business owners we find that many identify that they find marketing, cashflow and other areas of their business very challenging at times.
If you get to the heart of the matter, this is because most SME business owners are not trained in running a business. They tend to be technical specialists in the product or service of their business. The vast majority start out in business as one man or one woman operations doing something they love to do – framing pictures, plumbing, book keeping and so forth. The Australian Bureau of Statistics tell us the vast majority never get much bigger. In fact only 1 in 10 ever end up employing more than 5 people.
One of the main reasons they never get bigger, is the reason above – because they don’t know how to run an organisation. They don’t have the general management skills required of them as they expand. Such as hiring and managing people, strategic planning, financial skills, quality control, new business development.
If they came out of a corporate life, chances are someone was doing this for them in the bigger organisation where you can have a range of specialists contributing to the larger whole.
But in small business – whilst you can outsource some functions – like accounting, it’s hard to ever find enough resources to cover all the skills you need – so you have to learn them.
Here are the top five skills gaps, according to surveys we’ve done:
1. Strategy and Marketing – SME business owners rarely have the depth of skills they need to plan strategy and marketing. They implement ad-hoc, work day to day – and really never look up to the horizon and plan ahead. Hence, one of the biggest challenges for over 40% of small business owners is ‘how to get new customers.
2. Financial Skills – most SME business owners operate their finances on a day to day basis or month to month. They have a single bank account, limited reporting and get themselves into cash flow troubles regularly. Hence, in our surveys you find that cashflow is the single biggest challenge for between 3- and 40% of business owners. As a friend of mine – Alan Miltz – says – turnover if vanity, profit is sanity, cash flow is king! Most business owners don’t know where their cash is coming from, they don’t understand the margin, profit relationship and various other critical financial planning skills.
3. People – most SME business owners have trouble with hiring and managing people. They don’t have systems in places like job descriptions, performance planning and management. They find it difficult to fire people if they are not performing. There are lots of skills in the HR and people area, and these skills are seen as out of reach for many small business owners. And yet without people, there is no business – no matter how good the product or service might be, it can’t be delivered without good people. Of course, being an SME – the owner also may find it difficult to attract good people too.
4. Quality control – this is certainly a system or process lacking in many small businesses. The owner is usually a technical specialist and can push out high-quality products and services themselves. But they often find it hard transferring this level of quality to their staff. So they run into trouble when quality is not delivered to customers.
5. Business Development – SME business owners find business development very hard. They are often enmeshed in the day to day – just managing to service existing customers – a little frayed at the edges. And all of a sudden they lose a few customers, and then they are scrambling to make up the gap so they can pay staff, or make ends meet. I’ve spoken to many SME business owners, and they see business development or finding new customers a big challenge.
So there are a few gaps that SME business owners face.
One of the things I’ve been thinking about recently is – Who can help them?
I like to think I’m able to advise on the strategic marketing side of things – and I’ve written books with this goal in mind.
But what about the other skills. What role does a bank have in transferring some skills to the business owners they look after. What role can the SME’s accountant play in strategic advice. Could their insurance broker help with advice on financial planning or cash flow?
SME business owners put it all on the line. They run over 2 million micros to small enterprises that are the backbone of the economy. They deserve all the support we can give them, and I believe there are ways we can transfer some of the skills they need using technology and relationships in order to improve their success and ensure growth and prosperity.
Of course, the SME business owner also has to recognise they have these skills gaps and look for ways of becoming more able as general managers too.
Have a great day.