One Bad Apple: Boutique Business Challenge

I have about a million other things to get done today that don’t include writing a blog post, but I’m all about being as open and helpful as possible and I feel this post might help other boutique business owners see a way through a problem, or just feel less alone.

When I started working for myself in the 90s I just wanted to work on something I loved doing and am great at. As my business grew I found my time increasingly divided between maker and manager and the budget strained (I talked about starting my business with no cash flow here).

But I also found success for my clients, for me and an ever-growing love of what we do at Magnitude Media. I found that I never tire of my job – a blessing. I found that we can make our clients money, build their brands, teach them what they need to know to grow and help them be better at being a business in an emerging media driven marketplace. I get to work with clients of all sizes, from mom and pop stores to huge brands. I get the privilege of writing books, articles and other content. I am a lucky, lucky lady.

The past two months have been a real challenge, however. We had reached a certain level of rapid growth after years of hard work and happy clients, and had also accumulated certain financial reserves. I had a chance to grow the business again, which meant making some big decisions and taking a few calculated risks. I brought more staff on board, spent significant financial resources ramping up for a product launch, and then – one bad apple syndrome struck.

What is one bad apple syndrom? It’s my name for that one instance of non-payment of such a significant level that it can create a ripple effect of problems for a small business. Sometimes, it doesn’t matter how much you prepare, that one bad apple can still cause challenges. The bulk of my clients are amazing people that pay right on time and who feel like family. Then I had two jobs back to back that payed slowly (one is still out for collections 100+ days later). This meant downsizing some staff, slowing down some plans, and awkward conversations with vendors about payment schedules.

How can this scenario be prevented for you so that you don’t have to enact plan B and drain financial reserves to right your business ship? What can you do when a carefully calculated risk doesn’t pan out? Do a few things that I usually do but didn’t in the last 6 months, at great cost:

1) Have a ready-cash reserve three times larger than you think you need for your business.
This is a huge one for me. Underestimating business reserves needed means having to make cuts I shouldn’t have to be making at this stage of business ownership. One of these cuts was to not be able to go forward with the additional staff on board. Will I make this mistake again? Heck no. Failure is one path to success. I learned to treat my own reserves with the same care and caution I give to my clients.

2) Qualify your clients better.
I let the desire to work with a certain client because the large job sounded fun (it was) cloud my judgement on my normal qualification and deposit process. By skirting the process, I have no one to blame but myself for the fact that this client has yet to pay me after 100+ days (which is causing interesting financial times over here, let me tell you).

3) Qualify your project partners from outside of your business better.
This one has now come back to bite me in the ass twice. One of my weaknesses is a desire to trust people. For the second time that tendency has caused me financial pain in business. I’m not sure how I’m going to change my process here yet, because I don’t want to become an untrusting person, but this is an internal tendency I need to change – and fast. Choosing the wrong people to partner up on a project with can cause so many issues, whether the person doesn’t carry their weight on the project or is a slow payer or whatever the issue or combination thereof is.

4) Don’t be afraid to ask for help.
Asking for help is incredibly hard for a lot of us, especially those that have the temperament it takes to start a business or launch a product. It feels like weakness. That’s another personal trait I need to work on in 2012, because I am finding it is essential to overcoming challenges like these. Instead of the relentless ‘act-as-if’ cheer often seen in social media maybe we should all be more real. Life is amazing and my business is something I love, but sometimes it’s challenging. It helps no one to avoid discussing that part of life and business also.

Have you been in a similar situation where one bad apple spoiled your bunch? How did you overcome it?