Integration Challenges for Small Businesses

February 18, 2010, 5:00 am

Small Business Finance & Profitability

By William Stong

Let me introduce “Integrated Profitability.” It is a companion blog to the “Small Business Finance & Profitability” blog devoted to profitability reporting and related MIS. It is designed for large, complex corporations with deep and broad business models, and diverse profit dynamics. As such, many of the topics are beyond the typical small business. Note that the underlying business challenges and opportunities are the same. It’s just a matter of magnitude.

This week, Integrated Profitability introduced the seminal concept of “integration” as something that can yield tremendous bottomline benefit to large, sprawling, complex, disjointed corporations and conglomerates.

Integration is also a good approach for small businesses, although size makes it much more difficult to achieve. Here are some of the challenges:

● Less need

Small businesses, as the name implies, are small. There are fewer moving parts. The business model is less complex, the profit dynamics simpler. The range, depth, and breadth of the business are all less. Product and service lines are shorter. Customer bases are smaller.

● Scarce resources

If daily cash flow is a business’s number one issue, whether one has integration or not is hardly a concern. Achieving integration requires thought, time, and action. For small businesses, these resources are better spent on sales, acquiring new customers, managing expenses, and being acutely aware of what competition is doing.

These add up to much less that can be integrated. And, even if it were, there’s less benefit in terms of cost savings and future flexibility.

However, a small business that keeps integration in mind as the company grows might well avoid the mistakes of much larger companies who need to retrofit integration to their expanded, wide-spread operations.

Next week: Part Deux

Bill

William A. Stong

Email: william.a.stong@gmail.com

SBF&P # 54

Telephone: 925-202-6244