Small Businesses have suffered so greatly in the economic shutdown of 2020 resulting from the COVID-19 pandemic. This is NO surprise to anyone. The average business owner has little power to impact national policy and has impact on turning the economic tides. So what is a small business owner supposed to do?
Fascinating information from 2018. Small Businesses in the United States accounted for nearly 50% (47.5%) of all employees. In fact about 120 million people as of 2018 were employed by a small business, 100 million of those by companies with 20 to 500 employees on payroll. The impact our small businesses have cannot be over estimated. Small business is, has been and will remain the foundation of the American Economy and market. Find more info here. The final tally of number of small businesses to fail in 2020 is being calculated as I write this, but estimates so far are that about 31% upwards of 47% have or will soon close. Note, that in an average year about 7% churn through this closer rate (5x times normal). This is a HUGE toll to be taken, so what is a small business owner supposed to do in 2021 and beyond?
To answer this question properly, we must examine the true cause of closure. Generally speaking, a small business will close when they loose the means or will to continue. Loosing the means to operate could mean failures in their supply chain, decrease in customer demand, selection of a competitor in a shrinking market or other similar causes. Loosing the will to continue can be as simple as growing wearing of too many hours, too little return and too little hope for improvement. As a small business owner myself, I can personally attest to these all as being true in some form, for Texas Quality Assurance and many of our clients (almost exclusively small businesses as well). It is easy to be caught up in the struggle, the fear, the anxiety and especially when the livelihood of your team and their families depend on your success. Problems are NEVER best solved from a position of fear or anxiety. The best way to solve any problem is to identify the root cause and mitigate the root cause with a new/improved process and the process approach.
What is the root cause to small business failure? There are many causal factors at play, some to be mitigated well, some are more difficult to mitigate. These factors include (not limited to):
- Failure to adapt to a largely remote workforce/workplace
- Decrease in demand due to decreased economic activity
- Increased competition due to decrease in demand
- Price reductions as a result of customer pressure and/or increased competition
- Supply chain failures
In order for a small business to survive at least 2 of the above 5 factors must be addressed and mitigated, however I argue and argue strongly that organizations both small and large that are able to successfully mitigate all 5 will not only survive but thrive during the inevitable economic rebound.
Mitigation for: Failure to adapt to a largely remote workforce/workplace
Many resources have been made available during 2020 to aid organizations large and small to achieve more with less in and increasingly remote workplace. Please take the time to watch a presentation made at the ASQ 1405 (Houston ASQ chapter) in the summer of 2020 addressing integration of existing technology into the workplace. September 2020 Professional Development Meeting. At Texas Quality Assurance we have found that remote Internal Auditing can in fact be more effective and more efficient in many instances than traditional in person audits. No doubt, the in person method is more comfortable and “feels” more natural, but remote auditing offers many advantages. Additionally, many organizations, including us at Texas Quality Assurance, are able to effectively communicate and maintain a team atmosphere with use of tools such as Microsoft Teams, SharePoint email and text.
Mitigation for: Decrease in demand due to decreased economic activity
Decreased demand is difficult for a small business owner to affect directly. The best option available to a small business owner and their sales and development team to do is understand the value they offer to their clients. During good economic times, this value can be overlooked and undervalued by both the client and the organization. In addressing root causes, one must understand some causal factors are difficult to mitigate and more efforts must be place elsewhere. I will leave more detail in demonstrating value to current and prospective clients to the sales and business development experts.
Mitigation for: Increased competition due to decrease in demand & price reductions as a result of customer pressure and/or increased competition
While demonstrating value to existing and new clients may lie somewhat out of reach of this QHSE Manager turned small business owner, increased competition is well within my wheelhouse. Customers make decisions in supplier selection (see ISO 9001:2015 clause 8.4 Control of Provided Products and Services) for any number of pre-determined criteria. These generally include price, delivery time and product/service quality.
Please note that price can be reduced to the expense and detriment of the small business. Price reductions can result from improvements to production and service provision processes and general business efficiency and effectiveness. Improvements to production and service provision will in turn increase product/service quality and delivery time without increasing cost. This is the crucial “fix” to survive and thrive in the new year.
The “Process Approach” is one of my favorite topic, commonly discussed in the #QualityMatters podcast as well as in our QMS Bootcamp video series. The process approach, developed by Edward Deming, also known as the PDCA “Plan Do Check Act” cycle is far more than some abstract management tool. This is the fundamental method of implementing, maintaining, integrating and improving any business process, any process as a matter of a fact. Check out “Coffee Pot Process Mapping” video.
Another key feature to setting your product, your people and your process apart in the marketplace are industry certifications. We have addressed ISO 9001 already, but there are many more for every industry, and ISO 9001 will suite any industry as well. These certifications serve multiple purposes. First, you are able to clearly differentiate yourself from much of your competition. Additionally, they force compliance to your own best practices and process procedures. Adherence to existing procedures, process and continued effort to continually improve are the foundation for process improvement. Combined with a firm and well communicated and understood mission you and your team will be able to mitigate risks due to increased competition due to decrease in demand & price reductions as a result of customer pressure and/or increased competition.
Mitigation for: Supply chain failures
In standards such as API Q2, there are requirements for contingency planning. Proper contingency planning combined with an approval process for your external providers will leave you and your team in a position to respond to supply chain failures. The small business owner will find in a short period of time they are in a position to evaluate their supplier in a similar manner as their existing customers, especially in B2B sales.
Spring of 2020 Predictions
Late in the Spring of 2020, once we all realized that “15 days to slow the curve” was going to be many months of shutdown, lockdown and general instability we predicted that near the end the first wave, we would see a surge in small businesses take one of two paths. Path A, to hunker down and hold out. Path B, to reduce costs, increase productivity, and increase marketability. Like clockwork, late in October we saw a surge in requests for Internal Audits and more interest in Quality Management Consultation (including Health-Safety, Environmental, Medical Devices & more) than we’ve yet seen in any previous year.
January 2021 Predictions
Small Businesses looking to thrive in and beyond 2021, compete against the big boys, and continue to provide for their teams and their families will be forced to improve processes, develop new processes and for many this means not only obtaining certification to standards such as ISO 9001/45001/1400 API Q1/Q2 and more but fully embracing the process approach and continual improvement cycle. The small business landscape will be changing more than it has since the turn of this century with the dot com boom and rush to integrate technology. In the next decade, the small businesses that thrive will be forced to operate with great speed and agility than big business. With proper processes, a small team is well suited to step up to the challenge. Will you and your team be ready to lead small business in the next decade?
Kyle Chambers – CEO & Founder of Texas Quality Assurance