Why Many Small Businesses Struggle

What Makes a Business Great?

Every entrepreneur, every business owner, wants to believe that their business is “great” – not just okay, not simply good – but great. The problem is that most businesses, no matter how hard they try, rarely rise above the level of “okay” and very few can arguably be said to be great.

Good to Great: Why Some Companies Make the Leap and Others Don't is a book written by Jim C. Collins that examines what differentiates companies that achieve sustained, exceptional performance from those that do not.

The thesis of the book is that companies can achieve greatness by adopting specific practices and principles. These include:

1. Level 5 Leadership: Great companies are led by Level 5 leaders who exhibit a blend of professional will and personal humility.

2. First Who, Then What: Great companies prioritize getting the right people on board and in the right roles before setting a vision or strategy.

3. Confront the Brutal Facts: Great companies face their challenges head-on and seek the truth, no matter how difficult it may be.

4. The Hedgehog Concept: Great companies focus on what they are passionate about, what they can be the best in the world at, and what drives their economic engine.

5. Culture of Discipline: Great companies instill a culture of discipline that aligns with their values and goals, and by maintaining focus and consistency in their actions.

6. Technology Accelerators: While technology is not a driver of greatness, great companies use it to accelerate their progress when it aligns with their core strategies.

7. The Flywheel Effect: Great companies achieve momentum through consistent, incremental progress and focusing on small, continuous improvements.

Collins argues that making the leap from good to great requires a commitment to these principles and a willingness to transform the organization's culture.

Here is how Collins explains the distinction between a good business and a great business:

Good Business:

? A good business is one that performs adequately, often showing average or slightly above-average results. It may maintain consistent profitability and operate efficiently, but it does not reach a level of outstanding performance compared to its peers.

? Good businesses tend to maintain the status quo and may struggle with innovation or strategic transformation. They might be content with their current level of success and less willing to take the risks necessary to achieve greatness.

Great Business:

? A great business consistently outperforms its peers over an extended period, achieving exceptional results that far exceed market expectations.

? Great businesses exhibit a strong focus on their core competencies, driven by a clear understanding of what they are passionate about, what they can be the best in the world at, and what drives their economic engine.

? They demonstrate disciplined action, maintaining consistency in their values, goals, and strategic direction. This discipline allows them to make calculated decisions and stick to them, even in the face of adversity.

Working On It, Not In It

Every small business owner has experienced the rush of the so-called “honeymoon” period of being a start-up. The long hours, tireless commitment to working on building a viable concern, and the deep gratification of seeing an actual business come into being.

But too many of these owners can find themselves, years down the road, still working long hours and never able to free themselves from the business they’ve created lest it fail to function properly.

Another timeless business book – one that is practically iconic – is The E-Myth Revisited by Michael E. Gerber. Gerber's book presents the idea that most small businesses fail because the owners are skilled in their craft but lack the necessary business management expertise. Gerber describes the "E-Myth" or "Entrepreneurial Myth" as the mistaken belief that starting a business requires nothing more than technical skills or passion for the work.

This approach often leads to business failure.

The book's central thesis is that to build a successful and sustainable business, owners must shift from working in their business (focusing solely on day-to-day tasks) to working on their business (creating systems and processes for long-term growth).

Michael E. Gerber advocates for a systematic approach to business development, emphasizing the importance of creating repeatable processes, standardizing operations, and delegating responsibilities. He also outlines the need for business owners to adopt three distinct roles: the Entrepreneur (visionary), the Manager (organizer), and the Technician (doer).

By implementing Gerber's approach, business owners can transform their small businesses into well-organized, scalable entities that operate efficiently and effectively, ultimately achieving greater success and freedom for the owners.

Dysfunctional Teams

All businesses, large or small, or nothing more than a team of people engaged in providing a product or service in exchange for money. And these people must work together effectively and productively in order for the business to succeed at that goal.

The reality is that too many “teams” of owners, managers, and employees fail to do so - and on a number of levels.

The Five Dysfunctions of a Team is a well-known business book written by Patrick Lencioni that explores the common challenges faced by teams in organizations and how they can be overcome. The book is structured as a fable, telling the story of a fictional CEO who is tasked with turning around a struggling company by improving the performance of its executive team. Through the story, Lencioni outlines the five dysfunctions that can hinder team performance:

1. Absence of Trust: Teams that lack trust struggle to be open and vulnerable with one another, which can lead to an inability to work together effectively.

2. Fear of Conflict: Without trust, team members may avoid conflict, leading to a lack of honest and open communication and the failure to address important issues.

3. Lack of Commitment: When there is no productive conflict, decisions may not be fully vetted, and team members may lack buy-in or commitment to the team's goals and plans.

4. Avoidance of Accountability: Without clear commitment, team members may avoid holding themselves and each other accountable for achieving the team's goals.

5. Inattention to Results: When teams are not focused on collective results, they may prioritize personal goals or departmental achievements over the success of the team as a whole.

Throughout the book, Lencioni emphasizes the importance of open communication, trust, accountability, and a focus on collective results for achieving team success.

The "Secret" of Business Success

While these concepts really are no secret, understanding and finding ways to successfully implement them can be a challenge.

Which is why I wrote a small book, The Five Dysfunctions of a Small Business, that weaves together key principles from Michael E. Gerber's The E-Myth Revisited, Jim Collins' Good to Great, and Patrick Lencioni's The Five Dysfunctions of a Team, to provide a comprehensive approach for overcoming common challenges faced by small business owners.

This book seeks to guide entrepreneurs and small business owners in building (or rebuilding!) sustainable, high-performing businesses by addressing five common dysfunctions and implementing a cohesive strategy rooted in systems, disciplined action, and team dynamics.

Systems and Processes

Gerber's focus on creating systems and processes is essential for small businesses to operate efficiently without relying solely on the owner. Like the EMyth, this book emphasizes the importance of standardizing operations, establishing repeatable processes, and delegating responsibilities. These efforts not only streamline daily tasks but also enable business owners to work on their business rather than merely in their business.

Disciplined Action and Leadership

Drawing from Collins' principles, The Five Dysfunctions of a Small Business also underscores the significance of disciplined action and adaptive leadership in transforming small businesses. Level 5 Leadership—combining humility with strong professional will—serves as a model for business owners striving for continuous improvement and excellence. This approach aligns with the creation of a culture focused on disciplined processes and innovative adaptability.

Effective Team Dynamics

Patrick Lencioni's insights into team dynamics provide a foundation for building cohesive, high-performing teams. This book highlights the necessity of fostering trust, healthy conflict, commitment, accountability, and focus on collective results within teams. By addressing these dysfunctions, business owners can enhance productivity and collaboration, enabling teams to implement systems more effectively.

Holistic Strategy for Success

The synthesis of these three frameworks provides a unified approach to building and sustaining a successful small business. By integrating Gerber's systematic processes, Lencioni's emphasis on team cohesion, and Collins' principles of disciplined action, this book offers practical strategies for overcoming common dysfunctions and achieving sustained growth.

In addition, I have drawn upon almost two decades of coaching hundreds of small business owners in a wide range of industries. Despite the differences in products, services, and industries, these individuals – and their companies – share several common issues that stall growth and, in many cases, business success.

Help for the Small Business Owner

Incorporating these four pillars, this book guides small business owners in addressing five critical dysfunctions: poor financial management, ineffective leadership, inadequate planning and strategy, poor communication, and inefficient operations. By providing actionable solutions for each dysfunction, my hope is that this book will help empower entrepreneurs to establish strong systems, build cohesive teams, and adopt disciplined practices.