Confessions of Four Small Business Fixers
As a small-business owner, you face a myriad of challenges—regarding strategy, personnel, customer retention, sales or all four combined. While you may feel overwhelmed at times, know that you are not alone; there are people to help.
For many, those people are management consultants. These are professionals, as defined by the Institute of Management Consultants USA, who, for a fee, provide independent advice on how to achieve goals through improved utilization of resources. They diagnose problems and opportunities, recommend solutions and help implement improvement.
Costs for these consultants vary widely. The IMC quotes the Bureau of Labor Statistics median pay for consultants in 2010 as $37.58 per hour to more than $78,000 per year. That said, fees can range from upwards of $300 for small projects to the tens of thousands for large projects.
Jane Blume, a spokesperson for the IMC, reports that the field is growing in size. "In 2007, there were 500,000 management consultants; in 2010 there were 718,000," she explains. "[According to the Bureau of Labor Statistics], the job outlook for 2010-2020 is that 157,000 more people will join the profession."
Here, we hear stories from four small-business management consultants (a.k.a. "fixers") of businesses heading for failure and how they were turned around. The consultants we interviewed opted to mask the names of their clients to protect the reputation of each small business.
The Profit Fixer
The problem: A longtime family business produces an evergreen product with very little overhead. The company brings in a seven-figure revenue and a seven-figure profit.
The aging business owner wants to hand off his business to one of his children and convinces his son, who has little business experience, to take over the company. The son doesn’t like his dad’s product, and introduces a new product that requires more overhead, yet brings in double the revenue.
A few years down the line, the company is losing money due to the high margins. The son is perplexed and frustrated. Family finger pointing ensues.
“This is when I was called in,” says Carol Roth, former investment banker, business consultant and author of The Entrepreneur Equation. “For every dollar they were selling, they were losing more than a dollar.”
The solution: She recommended a restructuring—basically scaling back the new product and reintroducing the former into the mix. This, unfortunately, wasn’t what the son wanted to hear. Months of handholding followed and a year later the son relented. Today, the business is back to selling its original product and again making a profit.
Roth says the real problem was a lack of succession planning.
“Just because you were born into an entrepreneurial family doesn’t mean you were born with the entrepreneurial gene,” she says. “It is better to put a business into the hands of someone willing and able to take it to the next level than running it into the ground.”
The Customer Retention Fixer
The problem: The owner of a real estate maintenance business loses her largest customer (read: 50 percent of her business) to a competitor and starts to panic. She calls Barry Moltz, consultant, author of Small Town Rules: How Big Brands and Small Businesses Can Prosper in a Connected Economy, and frequent contributor to OPEN Forum. He sees that she needs to restructure her company in order to stay afloat.
“Her biggest expenses were people. People who weren’t directly servicing clients had to go,” he says.
The solution: Moltz helped the owner lay off half of her workforce. He then put together a formal training process for the existing and new hires on how to continuously market and sell themselves—not just rely on one or two clients. Today, the business is turning a profit.
The Sales Fixer
The problem: The owner of a business-to-business company wants to grow the firm but can’t manage to increase sales and calls Donna Saul, founder of consultancy Donna Saul & Associates, for help.
After an investigation, Saul finds individual skill sets not matching up with job descriptions.
“The owner had more of a technology background than a management background,” she says. “Other people were in the wrong jobs, too; everything was willy nilly partly because people had been there a long time and the company had grown beyond each person’s abilities.”
The solution: Saul created job profiles for each position, then ran employees through assessments to test competency on a variety of topics. From there, she instituted training and reassigned several staff members to other areas of the organization where they were better suited.
“The company doubled its revenue in the months that followed all because people were finally doing the right jobs,” she says.
The Personnel Fixer
In Heather McCloskey’s 20 years in the human resources field, two disasters come to mind.
Scenario #1: The money-saving affair
The problem: A multi-location medical practice notices one of its offices is bringing in far more revenue than the others over an 18-month period while seeing the same number of patients. Confusion ensues and McCloskey, founder and CEO of HR firm McCloskey Partners, is called in.
After an investigation, she discovers that a vendor is giving heavy discounts (to the tune of $1 million) to the office. Through a search of work e-mails it is determined that the head of the office receiving discounts is having a romantic relationship with the vendor.
McCloskey explains the situation to management and they are stunned—a common reaction to such a situation.
“A lot of small employers hire family and friends and don’t put handbooks or policies in place,” she says. “Then, when something like this happens to them, they can’t believe someone would have the audacity to wrong them.”
The solution: McCloskey helped the company create rules and write an employee handbook. The offending employee was terminated and the vendor’s parent company was notified of the situation. He was eventually fired, too.
Scenario #2: The naked lurker
The problem: A 90-person small business requires each employee to change in a locker room before coming to work. Every day, one employee sits naked in the male locker room, thereby making other male employees uncomfortable.
Human resources is alerted to the problem and does nothing. Another male employee then files an inappropriate conduct claim against the company, and wins.
“It was a mess,” says McCloskey. “Really, the HR person should have reacted and had a conversation with the employee, but they felt too uncomfortable to do it.
The solution: The offending employee was removed and treated for a mental disorder and the human resources person was fired. McCloskey says these situations are more common than one would expect because business owners can find it difficult to talk with employees about touchy situations.
“It can be challenging and really awkward to confront an employee and be direct, but they are doing the person and the staff a disservice when they don’t say something,” she notes.
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Photos courtesy of: Heather McCloskey, Barry Moltz, Donna Saul, Carol Roth