How many times have you heard the complaint: "We can't seem to overcome inertia"? Usually you hear this phrase used when it's time to get things moving, to "get the lead out," to get some action. Yet when it comes to building your business, inertia can be one of the "good guys." When used in this sense, inertia means reliability or stability of performance.
At the core of every business are the things that really make the business go. They are the customer relationships, the technical competitive advantages, the sales and distribution systems, and the supplier relationships. When these core elements are stable, reliable or "inert," as the current thinking goes, a business has a better chance of survival.The problem is that small businesses tend to have a harder time gaining this stability. Especially for new small businesses, the lack of inertia in the core of the business often contributes to the trauma that leads to big problems, even bankruptcy.
When you think about it, it's no wonder that all the survival statistics for new small businesses are so dismal. It's an uphill battle. Compared to larger, more established companies, new small businesses face a formidable task.
Look at a brief list:
- New small businesses have greater difficulty raising capital mainly because the lack of a stable cash flow raises the risk to investors or lenders.
- Government regulations have a proportionately higher impact on new small businesses as they attempt to deal with the many requirements of city, county, state and the federal government.
- New small businesses are no match for more established firms in competing for employees, because they cannot offer the long-term stability and promotion opportunities that larger, older firms are perceived to have. The list goes on and on.
It would seem that something ought to be done to even the odds, and perhaps there are a few practical steps that should be taken.
First, if the management team of new small business recognizes early on that inertia, or stability in the core, is one of the "good guys," they have a fighting chance. As soon as possible in the life of their new venture, they should take steps to define policy and procedure for the many repetitive tasks and duties which are part of every business. This shortens the learning time for everyone involved and frees valuable management time for other duties.
Second, as soon as possible, the "core level" relationships should be identified and stabilized. For example:
- Key supplier relationships should be built and maintained. Many a new venturer fails to realize that suppliers are a more reliable source of capital than either investors or lenders. Credibility in supplier relationships is essential. Credibility means no surprises.
- Sales and distribution systems should be established and managed such that customers rapidly gain confidence in the business and its products. No matter how tempting, try never to "jerk your customer around," even when unanticipated setbacks occur to you behind the scenes.
Customers are your most ready source of cash. It is here that attention to good credit practices helps to stabilize the business core. Never borrow short and lend long. Minimize receivables.
Third, and this may sound like heresy with all you think you have to do: Put all the operating procedures defined in step one in writing as soon as possible. Far too much instability in the core of new small businesses results from failure to document operating systems. The result: constantly re-experiencing the learning curve, job after job, because nothing exists in writing to pass on past knowledge and experience.
From an employee's standpoint, you can see how it would almost be a self-fulfilling prophecy . . . proof positive that your business is a risky career move. No job duties outlined, no written performance reviews, no overall company strategy clearly written and communicated, all add up to no perceived stability, high employee turnover and high retraining costs. The result - continuing instability at the core of the business.
Attention to the core of a business early on has a powerful impact on long term success. So, although it sounds funny, it pays to create a little inertia (translated: stability and reliability) at the core of a new small business.