Outside and inside forces that can bring small businesses to their knees

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Traditional Fish 'n' Chips
Traditional Fish ‘n’ Chips (Photo credit: Wikipedia)

A tire manufacture that was once a household name recently complained that imports from China were helping to destroy its business. It was looking for help to rescue its business from financial difficulties. One doesn’t really know all the forces that are affecting this business but it’s circumstances does make one think what has management been doing to avoid the crisis?

Small and medium-size businesses can be impacted by outside and inside forces. By external factors, I mean the competition, customers and markets. It could also be legislation. Interior factors would include management, processes and controls as well as costs, cash flow and product quality.

It’s easier to control the forces inside your business. Proactive management are there to see changes occurring and to respond accordingly. But this isn’t always the case. Management can be lulled into a false sense of security or even in the worst cases become wrapped up in denial that everything is all right.

This is why it’s important to know what’s happening in your business – everything from quality, productivity, cash flow, cost control and customer demand. Without internal indicators and measurements you can be in for a shock when your business suddenly stops performing. Yet, it’s the imperceptible, small changes that occur over time that you really have to watch out for. An increase in customer complaints. An eroding bottom line. Rising costs without productivity increases.

In the external environment, the major forces to watch out for are customer demand, markets and competition. Customer demand can be impacted by demographic and psychographic changes that may not be noticeable at first but suddenly get into full swing and if you haven’t come up with a new plan, your small business could end up on the rocks. A small seaside town, for example, had several coffee and cake shops located for retired customers but with that generation moving on and seeking more pleasant, quieter places, both coffee shops have closed their doors.

Markets change over time and the entrepreneur needs to keep scanning the environment for opportunities. With the economy slowing down to just above zero growth, small businesses need to take care not to be caught in markets that are shrinking fast. If you are able, it is well worth considering how you could reposition your offering to a different segment of the market if your present segment is drying up.

Small businesses have more competition these days not only from the majors but from the many people who are starting businesses either for lifestyle reasons or through force of circumstances. This means that you get ridiculous competition such as three fish and chip shops within walking distance of each other and four or five coffee and breakfast eateries also within spitting distance from each other. Differentiation is essential otherwise competition will eat you up alive.

Whether it’s external or internal forces that will impact your business the real thing that matters is management’s recognition of the need to change. Small business owners need to come up with a creative vision that they are passionate about and can drive their business in a new direction where greater opportunity lies.

If you are starting out from scratch, you need to consider these outside and inside forces when developing your product and service. You can find the answers in a forthcoming book titled “Breakthrough Ideas”. Send me your details and I’ll put you on the waiting list. Act fast because limited copies will be available.

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