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Why Small Businesses Fail: Management

Updated: Sep 18, 2023

need to prioritize workload

In the world of oil and gas industries, a senior mechanic can easily rake in an impressive $120,000 per year. These seasoned professionals possess the skills to troubleshoot engines, initiate gas compressors, and bring one thousand horsepower diesel generators to life. Meanwhile, staff control system engineers command salaries of around $160,000 annually as they construct automated facilities for processing everything from food and cosmetics to hydrocarbons. These individuals, among others, have thrived in the corporate realm, earning a comfortable living through their expertise.

However, there comes a moment when some of these individuals decide to take destiny into their own hands. They grow weary of corporate red tape, corporate freeloaders, and the sluggish pace at which corporations operate. They yearn for a change, a chance to break free from the shackles of corporate bureaucracy and create something of their own.

Fast forward six months, and let us imagine a character named John, who has just secured a lucrative $250,000 contract. Excited and determined, he swiftly hires five individuals to assist him with the project. He believes these individuals are the cream of the crop, the best the market has to offer.

However, as the next day unfolds, John is met with disappointment. His newly assembled team seems disinterested and unproductive. One person is engrossed in phone calls, another is busily updating their LinkedIn profile, and yet another is engrossed in desk decorations. John cannot help but feel frustrated as he witnesses his team's lack of enthusiasm for the project.

In a state of urgency, John calls for an emergency all-hands-on-deck meeting. He inquires why nobody is genuinely engaged in their work. He reassures them about their payment, showcasing the concrete evidence of the Purchase Order. He expresses his profound disappointment with the team's lackadaisical approach to their roles. After delivering his opening statement, John poses a critical question: "So why is it that none of you are putting in any effort?"

A lone voice in the room echoes the sentiments of the entire team: "We don't know what you want us to do."

Many budding entrepreneurs possess the audacity and financial backing to launch their businesses, but not all of them have prior managerial experience. It is crucial to recognize that being an effective manager is a pivotal aspect of successful business ownership.

The performance of employees hinges on effective management. There is a well-known saying that applies here: "There are no bad students, only bad teachers." Similarly, in the world of business, it can be said, "There are no bad workers, only bad leaders."

As managers, it is our responsibility to provide clear directions to our employees. We must communicate our vision, mission, and goals effectively. Assign tasks, allocate resources, and help when needed. Effective management is the cornerstone of a thriving small business.

working as a team

Understanding the Role of Management in Small Business Success

Now, let us delve deeper into the reasons behind the failure of small businesses and explore strategies for achieving success through effective management. By doing so, we will not only add substance to this discussion but also provide valuable insights to aspiring entrepreneurs and small business owners.

1. Lack of Management Experience

One of the primary reasons small businesses fail in their initial stages is the lack of managerial experience among their founders. As mentioned earlier, individuals who excel in technical or specialized fields may have extensive expertise but may not be equipped with the necessary managerial skills.

Effective management involves more than just technical proficiency. It requires the ability to lead, delegate, communicate, and make strategic decisions. Many entrepreneurs find themselves in over their heads when they suddenly must wear the managerial hat along with their technical roles.

To address this issue, aspiring small business owners should consider gaining management experience before diving into entrepreneurship. This can be achieved through education, training, or working in a managerial capacity within an existing organization. Additionally, seeking mentorship or hiring experienced managers can be invaluable in navigating the complexities of business management.

working as a team

2. Inadequate Communication

John's frustration with his newly hired team's lack of productivity stemmed from a communication breakdown. He assumed that his team understood their roles and responsibilities, but he failed to communicate his expectations clearly.

Effective communication is a fundamental aspect of good management. It involves not only articulating tasks and goals but also actively listening to employees' concerns and feedback. When employees feel heard and understand their roles, they are more likely to be engaged and motivated to perform at their best.

Small business owners should prioritize open and transparent communication with their teams. This includes regular meetings to discuss progress, challenges, and goals. Creating a culture of open communication fosters trust and alignment within the organization.

supervising his team

3. Unclear Vision and Goals

In the case of John, his team's confusion about their tasks was exacerbated by the absence of an unobstructed vision and well-defined goals. When employees lack a sense of purpose and direction, they may become disengaged and uncertain about their contributions to the company.

Small business owners must establish a compelling vision for their companies and outline specific, achievable goals. This vision should serve as a guiding light, inspiring employees and providing a clear sense of purpose. Goals should be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) to ensure clarity and accountability.

By aligning employees with a shared vision and setting clear objectives, small businesses can harness their teams' collective efforts toward achieving success.

supervise the group

In conclusion, effective management is a critical factor in the success of small businesses. The stories of entrepreneurs like John highlight the common pitfalls that can derail small business ventures. However, these challenges are not insurmountable.

Small business owners can enhance their management skills by seeking education and mentorship, improving communication, clarifying their vision and goals, investing in training and resources, delegating effectively, cultivating leadership skills, and actively listening to employee feedback.

By addressing these challenges head-on, small business owners can build strong foundations for their enterprises, foster productive and motivated teams, and increase their chances of long-term success in the competitive business landscape. Small businesses have the potential to thrive when managed effectively, and with the right strategies in place, they can overcome obstacles and achieve sustainable growth.


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