The Small Business Absentee Owner

This title makes me laugh, and for some of you experienced business people out there, you probably had a chuckle as well.  How can a small business owner be an absentee owner?  Believe it or not, it happens, I see it often and it is a recipe for disaster.

I had two debt workout clients recently who are partners in a service business.  They started the business many years ago and grew it the point when they decided they were no longer going to show up.  It was 2007 and the country was still experiencing the tail end of the bubble years so they could get away with showing up once  a month and spending the remainder of the year going back and forth to Hawaii.  They had little oversight and thought that as long as the company was profitable, they could spend the retained earnings on themselves and that there would always be more for tomorrow.

As the economy took a turn for the worse, these owners were in a state of shock.  They had no ability to call their vendors and ask them for discounts or extended terms.  The vendors did not know the owners and the employees did not build the close personal relationships with suppliers that small business owners typically do.

The employees were used to working their regular hours and being paid for the weeks worth of work.  When business slowed they were not interested in working the extra time at the end of the day or coming in early to be well prepared for their sales calls and the owners had no personal relationship with their staff in order to change this.

Their customers who stopped ordering did not know the owners and had no loyalty to them.  When the competition started lowering their prices, they gladly switched to the next best thing.

Worse thing yet, my clients had no ability to step back into their roles as small business owners to make the necessary changes to keep their business alive.  They had been out of the business for so many years that they barely knew how it operated internally.  They did not know a single client and many of their own employees.  As crisis hit their company they had no ability to naturally step forward and lead the team to victory.  None of the key employees had any confidence in them as they just witnessed the business crumble while they stood on the sidelines.

Even a good passive owner shows up consistently.  They review numbers with management and take part in all key decisions.  They implement strategies and lead the company even if on the sidelines to at the very least let their presence be known.

A business is your investment.  It is your livelihood and must be actively managed and monitored just like if you had an investment in the stock market.  During an up market, everyone makes money, even those that are not managing and monitoring their investments can do well.  It is the true experts that survive the down markets, and likewise you need to be actively managing your business if you are going to survive the downturn and produce better than average results for your business.  Maintain the status quo and you will end up with the same results as everyone else…..Bankruptcy and loss of your business and livelihood.