Mid-Market Business Dilemma: Limited Resources

by: Dr. Donald N. Sweet

This past week I had a conversation with a former client and friend of ten+ years. We’ll call this friend, Tom, for purposes of this post. Tom runs a business with four locations in four states with over 100 employees. Recently he has run into cash problems because of a classic dilemma Mid-Market companies face – too few resources.

In Tom’s case, the problem was not initially too little cash, it was too few management resources. Tom and his management team embarked on two large capital projects at the same time. To compound the resource issue, both of these projects were over 100 miles from headquarters and in different states.

Individually, both projects made sense for the company to undertake. However together, they became too complex for the team to manage when coupled with the inherent business challenges that present themselves from time to time. This is a common error many Mid-Market companies make.

As the onion was peeled back a bit further, it was discovered that the company had suffered a weak Controller. The ripple effects of this held up calendar year end financial statements which are still not done and it is now late July! Probably even more damaging was the lack of any meaningful cash forecasting.

Tom’s company was careening down the hill without being able to see out the windshield, or even the rear view mirror. Meanwhile the management team was consumed with two major projects, their resulting issues, and running the business. They were hoping against hope there would not be a fender bender.

The first major accident happened last week when they ran out of raw materials when they were put on credit hold by a critical vendor. This shut down their production which in turn also shut down an important customer. As any CEO knows, this is one of the most deadly of business sins.

So now, on top of all of the other issues Tom’s management team faces, they have a credit crunch. As everyone knows who has weathered that situation, all issues now seem to become amplified. The Financial Statements from the outside accountant are at best a couple of weeks away. The bank loan extension is good for another five weeks and little cash relief is in sight.

Tom and his team will have to do their best to manage their way out of this serious issue, there are no silver bullets. That said, what are the major lessons the rest of us can take away from this dilemma? Mid-Market companies with limited resources need to be sure they don’t reach too far beyond their capabilities.

This does not mean that our organizations shouldn’t stretch themselves. That can be just as problematic as overreaching. That said, what are the three most important resources a Mid-Market company has? In this writers opinion, they are its people, cash and customers.

People rank first because without good people the other two don’t last long. People make all the decisions in a business. They then execute those decisions. Of course those two are joined at the hip. I once worked for a CEO who used to say give me a fair plan, well executed over an exceptional plan poorly executed any day. This CEO had similar things to say about management teams and their working well together.

At Vital Growth Consulting Group, we find that it is the people and, in particular, the management team that adds the most value to the business. Some of the questions that we ask, and suggest you do too, are as follows: Does the management team take good care of their employees? Do they consistently communicate the company direction clearly and concisely to all stakeholders? Do they work well together? Are they able to intensely debate major issues, get outside points of view, reach timely decisions and get everyone behind those decisions? Are they realistic about risks without being risk adverse? Do their skills, outlook and experiences complement each other?

When the answers to those questions are in the affirmative, the chances for success are much higher than when they aren’t. Just as in Tom’s situation, there are no silver bullets in any business venture. There are no absolute right and wrong answers. But Mid-Market companies can improve their probabilities of success, with limited resources, by making sure they have a strong, balanced and well-functioning management team.