Small Business: The Cinderella to their Global Step-Sister Corporations

Kenny Johnson, a friend of mine, sent me an interesting Cobert Report interview.  On the show, Steven Cobert drilled Jeffrey Leonard, the author of Do Small Business A Favor which appeared in the Washington Monthly.  Steven Cobert and Mr. Leonard jostled for the upper hand on whether President Obama should give a helping hand to small businesses in collecting receivables from big corporations.  Mr. Leonard presented evidence that the big corporations were “borrowing” from small businesses by floating their receivables.

There are some tactics that small business can use in minimizing this risk, but before getting to that, I wanted to make a political observation.  Mr. Leonard’s position to help small business does not fall on deft ears, however, I doubt that he will receive anything more than sympathy.  In an era where a substantial part of the electorate are clamoring for a smaller government, the idea of President Obama maneuvering the US government into business affairs, is Utopian.  The political atmosphere, fuelled by the Tea Party movement and  the Koch bothers’ millions, has created a subjective anti-government movement among the electorate.  In other words, the polls show that government intervention into the lives of individuals is only welcome if they promote that individuals interests. Otherwise, the consensus will be that government is bad, and overreaching.  So, it is with Mr. Leonard’s position.  Small business trade groups will continue to fight government regulation unless it benefits their specific interests.

However, putting the politics aside, what can we learn from this delemia and how can we fix the problem.  Here are some of my questions and recommendations:

1. Is a disproportionate share of your business locked into one major client?  For example, is 20% or more of your income coming from one customer?
2. Is your business strategy dependent on one customer employee representative?
3. Are you drawing on your business credit line to stay in business because your major customer is not paying you within 30-45 days?
4. Are you afraid to call your major customer for payment for fear of losing them?
5. Are you dependent on one of your sales people for the majority of your business?

If you, as a small business owner, answer ‘yes’ to any of these, you need to alter your business strategy.  When starting a business, it is hard to not be dependent on a couple of big clients, unless you are a volume-type business.  The time to alter your strategy is now, and not when your big clients fires you.  So, what do you do?

1. May I suggest Good to Great by Jim Collins.  The book compares companies that took a leap to greatness.  Some of these points can be translated even to the smaller company, like building a team first, then deciding where to go.
2. Another good book, more applicable to small business, is The E-Myth Revisited. This book demonstrates that a small business  cannot grow when owners run the small business by themselves.
3. These books can create a good foundation, but the small business success is not just the strategy, but the implementation.  Once you set a course on how to grow your business beyond a major customer, you must work the strategy for a long time.  You cannot take your eye off the horizon for one week.
4. There are many blog articles on our site on tips to creating and implimenting a good small business strategy.  One thing you cannot depend on, is the US government helping you.