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Delving Into the Small Business Financial Arena

by

Marta Vago, Ph.D.

Small businesses are getting harder to define. Annual gross sales and number of employees are no longer in lock-step. One company with six computers and eight employees can generate $50M annually, while another may need 80 employees and thousands of square feet to gross $6M. So, what is small?

For most people who go to work every day, the size of the business means little. After all, working in a business – any business – is nothing more than working with a group of people to deliver products and services to customers. On a human level, size is simply a matter of how working in a particular place feels to someone who is working there. Let me be more specific.

How people feel about working has a lot to do with the people they work with every day. Whether it is an eight-person department within a large organization or an eight-person start-up company, eight people are eight people. The smaller the work-group, the more challenging the relationships among the people in the group become. They must find ways to get along and work well together, lest they want their workdays to turn into nightmares.

While small-scale work environments have many similarities, small businesses that are owned and operated by two or more members of a family present special challenges. The following is a good example.

Recently I was called in by a family business owner to help him and his company manage the rapid growth of the business. While the company’s current sales are about $1.5M, he expected volume to at least double within the next twelve months. Jim, the owner, has both his daughter and son working in the business. Beside the three family members, there are only three other employees, two in entry-level positions. The third, Susan, is a veteran in the business and close in age to Jim. This is how Susan described her experience of working in a small business:

“I feel like an outsider. No one really talks to me. Jim discusses the business only with his children, even though I have more experience in the field than the two kids put together. Plus, Jim has me reporting to his daughter who doesn’t really understand what I do – or what she should do. It’s all very frustrating. I can’t wait for this business to grow. We need more people around here who are not family.”

As a family business consultant, I hear similar complaints daily. The owners play favorites with family members or close friends. They keep non-family out of the communication “loop.” Non-family employees are rarely asked for their opinion or input. People who know less supervise people who know more. And so on.

Are only family businesses guilty of some of these practices? Hardly. Keeping employees uninformed, basing promotions on factors other than competence, and failing to take full advantage of what people have and want to offer, are all-too-common examples of how company owners waste their most precious resources: people.

However, what makes these wasteful – and disrespectful – practices especially difficult for employees who try to do their best in a close and small work environment include the following: When there are only a handful of employees, whom do you complain to? And, if you do unburden yourself to a fellow employee, what are the chances that everyone else won’t know about it in a matter of minutes?

In a small business there is no place to hide. Even if you don’t “wear your heart on your sleeve,” people will know how you feel because they are simply too close not to. And, just when you most need understanding and emotional support is when you are least likely to get it – or can afford to ask for it. While small businesses are a great training ground for understanding what it means to be in business, they may not prove to be hospitable to people who simply want a job.

How can a person survive the “small business employee” syndrome? Here are a few suggestions:

* Resist the temptation to believe that “we’re just one big family.”

* Expect to get emotional support outside the business.

* Recognize that good ideas are no more welcome in a small business than they are in a large one.

* Avoid taking sides with anyone, especially if they are members of a business-owning family.

* Find ways to demonstrate how your knowledge and expertise are critical to the success of the business enterprise (no, your value is not self-

evident).

* Be cheerful and positive (even if you don’t feel that way). An upbeat attitude communicates your ability to survive under any circumstance, which means that you don’t need this job to make you whole.

* Start a business of your own and be smarter about how you treat your employees.

Ultimately, small business is a state of mind. Thinking like a small business may well have the greatest impact on the quality of people you will attract and retain as you plan to move your business forward. Think carefully.

Marta Vago, Ph.D. is Professional-in-Residence in the Family and Closely Held Business Program at The Anderson School at UCLA, and founder/principle of Family Business Advisory International. For further information, please visit her website: www.familybiz.com or call (310)396-5034.

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