Challenges Facing Small Businesses

Pilot and Speed

Gallup recently polled small business owners on their top issues.

In order of importance the top five were: 1) Taxes, 2) Health Care, 3) Cash and its Availability, 4) Regulations and 5) Human Capital.

Let’s admit it, larger competitors have a built in advantage with the first four issues, due to their economies of scale. For example, according to the Small Business Association, small businesses on average pay federal income taxes of around 27% for their S and C Corps, whereas large businesses pay an average of 20%. And some large companies like Google, Amazon, and GE pay no federal income taxes! What would your business look like if you paid no federal income taxes?

However, the one area that most small businesses can develop a sustainable competitive advantage is in Human Capital utilization. They are less hamstrung with costly layers of bureaucracy and control. They are also able to change faster and have more flexibility in the application of resources.

The only Human Capital disadvantage that a small company has is their inability to afford the best talent. A large company can easily afford a talented full time CFO, IT Manager, VP of Marketing/Sales, Lawyer and VP of HR, and can ill afford not to have this talent due to the size and complexity of their business. At a minimum this talent would cost a medium sized company $1.4 million annually with benefits.

Small companies simply cannot afford this. Nor do they need this type of talent on a full time basis. But they could from time to time greatly benefit by having access to this type of talent on an as needed basis, rather than owning it.

It is a smart business practice for a small company to establish external expertise relationships. Additionally, cultivating these relationships over an extended period of time creates added value, due to their deeper understanding of your business. This familiarity facilitates their ability to craft better solutions due to their greater understanding of your organization’s culture, needs, vision and practices.

Adopting an as needed approach for this talent in these five disciplines, would cost approximately $3,600 per week. Their collective experience could save your company time, avoid problems, improve your P&L and eliminate stubborn issues. In short, it will help your business achieve a higher level of success.

However, the real value of having routine access to this type of talent is found within the non-financial benefits. Tapping into these resources will make running your business more fun, less stressful and free up more of your time to pursue either your business or personal interests.

Life is short and for most businesses it is even shorter.   For example, the average corporation is only six years old and the majority of firms don’t survive their first two years.  So differenitiate yourself by thinking big and managing smart by developing your firm’s inherent Human Capital advantage.

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