THE RENAISSANCE OF SMALL BUSINESS MANAGEMENT

Take a look at the drawing and assume that companies have been up at the 100% line for their business pre the economic crisis. Almost overnight you have seen their marketplace retract by over 50%. What effect has that had on them? They have had to cut their business by half. What has that done to the supply chain? Cut the supply chain by half? The dynamic is not That simple. If you have your business cut by half, you cut your supply chain by more than half.

You would do this because there is more in your pipeline already being done, these products are already on order, its the long tail.

So it drops, nothing happens for a while because the bullwhip effect caused by the orders is settling itself down. Now what happens is that you see people reporting more work, now that the bullwhip has settled you have to bring some stuff through. They have gone from really really busy working seven days a week to nothing overnight, to suddenly they have got work again.

Now people think that you will get this grass roots recovery, and it will grow and grow to where it was. It doesn’t, it will bounce along for a long while because you just don’t know what the market size is anymore.

People think that what is going to happen is that their businesses are going to grow again and get straight back up to where they started again. It is a different dynamic now. You were up the top, but you have just halved your workforce, your stock and your working capital based on future orders. Your business has been reconfigured. Your workers and your workers are gone.

The different dynamic is that the CEO’s that have been cradled all their life. The decision to buy capital equipment or put food on the table is a decision that they have been sheltered from, because the work has been sufficient enough to allow them to not to have to do it. Their businesses have now dropped, they are going to assume that the $20million project they took on last year, they can do this year. They will be lucky if they can take on a $2million project, they haven’t got the capacity, they haven’t got the finance, they haven’t got the ability in the supply chain to do this and they physically have not got the people on the floor with the smarts. The officers and the project officers are all gone. If you were asked to reconfigure your business from half of its size to its old size today... you could not do it.

Most of the CEO’s that were running the businesses at the top of the graph, have not had the experience of having to grow the business back up to the top. It is not going to be a straight line. They are going to have to do what every other entrepreneur has done throughout history. They are going to have to go step by step, bit by bit.

This is the renaissance of the entrepreneur, this is the renaissance of the small business manager.