15 Tough-Love SMB Rules From George Cloutier

These 15 tough-love small-business management rules are extracted from "Profits Aren’t Everything, They’re the Only Thing" by George Cloutier.

InformationWeek Staff, Contributor

October 25, 2009

6 Min Read

Rule #1: Profits Aren’t Everything, They’re the Only Thing - Decide now to make the total commitment to run over anyone or anything that gets in the way of your company‘s paramount need for profits. Run your business strictly by the numbers.

Rule #2: End Denial: Stop Deluding Yourself All The Way to Bankruptcy Court - Snap out of your coma and take a good hard look at your financials. Do an honest self-appraisal in the cold light of day. Understand where the leaks are in your business and how, as the boss, it‘s your fault.

Rule #3: Forget Sweat Equity - Too many business owners believe that when they‘re building a business they shouldn‘t pay themselves a salary. Venture capitalists call this "sweat equity." I call it working for nothing and being a fool. The inability to pay yourself a full salary is a red flag that there is something wrong with your business. You‘re the one who takes on all the risk, so take better care of yourself.

Rule #4: Love Your Business More Than Your Family - Put business first. Always! If you‘re not fully focused -- if family, friends, community and church fill up your busy weekly schedule -- you are probably failing to deliver real profits for your company. Your cell phone is for taking orders from clients, NOT grocery lists. Weekends are for work. Pray at your desk if you must. Your business is not a part-time job. Be there or be broke.

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Rule #5: The Best Family Business Has One Member - Blood and business don‘t mix. Profits will always be better when you‘re not keeping an extra sibling, spouse, child or in-law on the payroll. More than 60% of the small businesses we work with are family-owned, and that‘s where most of their problems start. Fire ‘em! Cancel your kid‘s membership to the lucky sperm club.

Rule #6: Delegate, Don’t Abdicate - Wear your "control freak" badge with pride. Micromanage, micromanage some more, and circle back to make sure the task is getting done right. Don‘t delegate to the point of abdication. Make use of fingertip controls and never hand over the reins to an employee, no matter how senior. If mistakes are made, it‘s on you.

Rule #7: Live And Die By A Real Plan - Stop fibbing that you have a real financial and operating plan. If you do, it‘s probably gathering dust in the bottom of a drawer. Instead set forth your profit goals and use iron clad fiscal discipline to enforce them. Budget using a Profits First plan. Cut costs viciously to earn in good times and bad.

Rule #8: Pay For Performance - Freeze your employees‘ salaries now. And forget about bonuses as some year-end entitlement. Whether they work in the mail room or out in the field on sales calls, the ONLY way to motivate employees is to compensate them for a job well done and hit them in their wallets when they mess up. If they don‘t like it, let the whiners walk.

Rule #9: “I Am Your Work God” - You‘ve got to be a tyrant. Owning a small business isn‘t a popularity contest. You cannot be effective as the owner of a business unless you are feared – it‘s the best motivator. When your employees know you are prepared to enforce, they won‘t question your demands, they‘ll just shut up and do it. It‘s better to be respected than liked. They should do what you say, not what they think. If not, fire =em, sooner rather than later.

Rule #10: You Are Not In Business To Pay Your Vendors - Managing a company‘s outgoing and incoming cash flow is daily, hand-to-hand combat. Every day is a fight to cover costs. So why not use every weapon in your arsenal? Use your vendors as a source of reliable cash – never pay them on time! Stall, in a polite and orderly manner, and consciously expand your payables. Think of every dollar you can defer paying is an interest-free loan. Use and abuse your vendors.

Rule #11: When Filing For Bankruptcy Is Your Best Option, Do It Early! - Be warned. This is a remedy that takes a strong stomach. It‘s the toughest decision you‘ll ever have to make as a business owner. It‘s a fabulous financial and legal maneuver that will free you of 90% of debt, as well as any other contractual commitments. And if you make this move before your assets and cash flow run about you will have a much better chance of having a successful Chapter 11 Reorganization. The law exists for a good reason: it‘s the only legitimate way to defeat a tsunami of debt.

Rule #12: Don’t Treat Sales Like Your Mother-In-Law - Don‘t view sales as an unwanted guest. Focusing on sales is the easiest way to grow your business in good times and sustain profits in bad times. Get out from behind your desk. Breathe down the necks of your sales team. Go out on sales calls. Foster your own relationship with top customers.

Rule #13: Give Up Golf, Retreats, Off-Sites, And Trade Shows - Golf is the biggest waste of time. Trade shows and retreats are just an excuse to goof off and schmooze on the boss‘s dime. Ban any activities that take you away from the office or a sales call. Business owners kid themselves that hitting the fairway is an opportunity to network but they‘re wasting thousands in country club dues and missing important phone calls that could lead to more sales. Eliminate these distractions.

Rule #14: Teamwork Is Vastly Overrated - Forget what all the management books tell you. Teamwork simply doesn‘t work. Teamwork encourages mediocrity, because your team is only as strong as its weakest link. Focus on individual performance. Your employees should be answerable to you, not to each other. It‘s a business, not a democracy. They don‘t need group hugs. They just need to know who‘s boss – you.

Rule #15: It’s Not The Economy Stupid, It’s You! - The recession is just another excuse for failure. But if you‘re losing money now it‘s because you weren‘t doing what you should have been doing all along. Cut costs, get aggressive about sales and fire lousy workers. Continue to invest in sales and telemarketing. As long as your business still has a pulse it‘s in your power to turn things around. Now is not the time for a pity party.

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