Not Listening Can Hurt Your Small Business

Most small business owners seek advisors who can help them improve their businesses. They want advice from those who have the experience and really know what they're talking about. But they can only benefit from the sound counsel if they listen to the expert's guidance. Unfortunately, there are some entrepreneurs who aren't going to hear the professionals out or follow a plan no matter what. At that point, experts realize that they might as well save their breath and hope that the business owner will eventually see the error of their ways before it's too late.

When it comes to offering his advice, franchisee Sam Badgley is very up front with his Fiducial clients in Williamstown, WV. He tells them exactly what he expects and makes it very clear what they need to do to follow his recommendations. If he encounters someone who repeatedly ignores everything he's been telling them which is a total waste of his time, he then decides to cut them loose as a client.

"Through experience I've learned that when you run into somebody like that they are not going to change," said Badgley.

Trust gives you a great advantage

Where the problems usually occur between advisor and client is in the administration of the account where owners fail to deliver the timely data Badgley needs to help their business.

"I'll get them to set timetables and set some of those goals or targets but they just repeatedly miss them," he said.

For those businesses heading for bankruptcy that have not heeded his advice, Badgley has suggested to owners that maybe they might want to work for another company.

"Either they have never worked for somebody or they don't have confidence," he said. "They don't understand that they could work for somebody else. I see the deer in the headlights look."

Badgley says that you can tell whether or not people are going to be receptive to change.

"Most people who come to you are desperate," he said. "They are in trouble-its crisis city and you can pretty well tell whether they've been there before and what caused it. They are always willing to change to solve the problem but you don't know if they're willing to go beyond that."

That's where experience helps, says Badgley, because after you've seen enough and been told enough things it all begins to sound very similar. He thinks that trust with any business profession gives you a great advantage because you know what has been successful with those types of comments so you can really cut to the chase.

Over the years Badgley has tried following up with former clients to see how they're doing and whether they eventually came around.

"By and large most just continue to struggle but for me it's kind of frustrating," he said. "That's the challenge."

New stage of business development

Lisa Borgerding, a CPA and business advisor in Fiducial's Arvada, CO, office cited several scenarios of clients who ran into difficulty by not heeding the advice of their advisors.

The first client is in the construction field and owes about $10,000 in payroll taxes to the Internal Revenue Service. Tack on penalties and interest and it's easy to see why this situation is having such a great impact on their business. Borgerding noted that whether you claim bankruptcy or not, payroll taxes are not going to go away.

"That's one of the largest expenses they're ever going to pay," she said. "They just don't realize how serious it is."

And since they've dug themselves such a large hole it's going to be even that much harder for them to escape it.

Another client owns a repackaging company that also hasn't paid its payroll taxes. Companies can easily fall into this trap especially when the economy takes a turn and they didn't have the volume of sales they normally do. But when advisors put together a payment plan to try and right the ship, owners need to follow through.

Experts maintain that it's difficult for some entrepreneurs to accept advice from others because they've built their business from the ground up by themselves.

"The reason for that is they've had success using their own intuition," said Dr. Ralph Daniel, a business psychologist and family business governance expert at the Center for Family Business Dynamics in Santa Barbara, CA. "They've done really well following their gut instincts while other advisors were wrong. They say 'why should I listen this time?' "

Entrepreneurs also fail to notice when they've entered a new stage of business development due to some kind of major change in their operation that could have been brought on by such factors as new owners, loss of owners or major growth.

"The owners don't realize they're in a new ballpark with a new set of rules they need to follow," Daniel said.

Being hard-headed can cost you

Roger Bierman, a Fiducial franchisee relations manager for Alaska and the North Central and Northwest regions, says there's no shortage of procrastinators in the small business ranks who listen to what you have to say but never put the wheels in motion.

"Some have to hear it many, many times," said Bierman. "There's an association between success and those people who react more quickly to changing trends and the procrastinators who just sit there and tread water."

For unsuccessful owners who procrastinate, nothing's ever going to happen so they can grow their business.

"Those that sit out there and don't follow a system are least likely to succeed but you need that to show it to the people who are doing things," he said. "There is a difference between night and day."

Bierman has a close friend who's owned an asphalt and concrete business for 10 years as a middle man in various projects. He advised the owner to lower his prices but the owner procrastinated for two years on his pricing and it ended up costing him a lot of money.

"He always wanted to run between 25% and 30% profit on his end but when you add that to the bill you get prices out of the market," he said. "I told him if you lowered your price and get back to the 15% to 18% range then you would make it up through volume."

This example does finish on an up note because the owner finally came around and lowered his prices two years later.

"Sometimes by not listening to good advice and being hard-headed it can cost you money," Bierman said. "That happens to a lot of people. They continue to use bad practices and some don't catch it until it's too late. Then they find themselves buried where they never can see daylight."

Personal fortune is on the line

No matter how strongly Fiducial advisors plead their case to convince clients, they can only go so far in the process.

Gene Polley, a senior business advisor in Fiducial's San Diego office, has a contractor client who does stucco work in the housing boom that's just making money hand over fist. But until he makes some changes in his operation, the contractor is going to be paying vast sums needlessly to the IRS when Polley says he could have designated some of those funds for a self-directed retirement plan. He has recommended on numerous occasions that the client change his business entity from a sole proprietorship to an S corporation to protect his interests.

"I guess he's just too busy to listen to my advice," said Polley. "He has multiple vehicles but his personal fortune is on the line every time one of his employees gets into a vehicle."

It's frustrating for Polley watching clients throwing money away on taxes when it could have been put to better use in the business but he knows there's a limit to how hard you can push people.

"You give people the experience of your years and sometimes they listen," he said. "Sometimes they listen to you the first time but it varies from client to client. You still keep on telling them to do the right thing."

In dealing with clients of both sexes Polley has discovered that women are smart enough to realize what they don't know while men only like advice when things are going well.

"When they're on a downward trend they really don't want to hear it," he said.

Perhaps it's the very strength that the business was founded on that is also its greatest weakness.

"Business people are successful because they're self-assured and have been able to buck the trend because they have this independent attitude," Polley added. "They don't follow conventional wisdom in getting into the business."

But that sometimes makes it harder for the owner to listen and act on the sound advice they've been given.

Dr. Daniel of the Center for Family Business Dynamics added that in his experience, the "Rule of Three" often applies to owners who resist advice.

"They don't believe it until they hear the same difficult advice from the third person," he said.

Stephen Parezo