When it comes to seeing mistakes that small business owners make, Kelley McLaren has a bird’s eye view in her job as a turnaround specialist at The Finley Group in Charlotte.
Earlier this month, she took top honors from Turnaround Management Association in the Small Business category. She won for the work she did helping to reorganize a food processing company, Bost Distributing Co., in Sanford.
By the time one of the company’s secured creditors called her in to help, revenues at Bost had fallen more than 40 percent from their 2010 peak, and the company had posted a $200,000 loss.
Twelve months later (and working with Luis Lluberas of the Moore & Van Allen law firm), McLaren had managed to turn things around – revenue up 21 percent, expenses cut 11 percent (without layoffs), and earnings up 217 percent.
So what are the common mistakes that small business owners make? Here are some biggies, according to McLaren:
“Tired Management”: This, she said, may be the most common of all. She described it as owners who refuse to change, even as technology, customers and markets change around them.
“Not being adaptive or forward thinking is a big struggle for people generally,” she said, adding that it can be especially hard for owners who built successful companies from nothing.
Not listening to employees: When McLaren goes into a troubled business, the first thing she does is talk with employees. They often have great ideas, she said, but don’t feel empowered to act on them.
“They know where all the skeletons are,” she said. “They know all the things that need to change.”
Head in the sand: Too often, McClaren said, owners simply aren’t watching key indicators.
“People wait until the place is on fire before they pull the fire alarm,” she said. “When you start to see a weakness in your sales or you’re losing market share, that’s the time to dig in.”
Poor use of cash: McClaren said owners often spend too much on one part of the business while not investing enough in more important things.
“They feel they’ve got to have the next best computer system or the next best whatever, even though what they’re currently working with is fine,” she said. “They’re not understanding what the return on investment is in placing that cash there.”
As for the Sanford-based food processor she helped to save, McLaren said the only casualty of restructuring was the former CEO, who was replaced when both sides agreed that the secured creditor would take over ownership. Along with the new owner, McLaren said, the company will soon get a new name.
Glenn Burkins is editor and publisher of Qcitymetro.com, an online news site targeting Charlotte’s African-American community. He is a former Wall Street Journal reporter and Charlotte Observer business editor.