The majority of small and medium-sized enterprises (SMEs) suffer to some extent from a potentially fatal condition, writes Clive Newell, director of business services provider Halagen.

The majority of small and medium-sized enterprises (SMEs) suffer to some extent from a potentially fatal condition, writes Clive Newell, director of business services provider Halagen.

The frightening fact is that you can be operating profitably while at the same time unknowingly have this silent almost invisible killer lurking in your daily operations.

The condition is called internal constituencies or inertia, and business owners and managers need to recognise the symptoms and act quickly before the problem leads to financial flat-lining or failure.

Symptoms of inertia in a business include reaching a ceiling on growth or profit and worsening cash flow, having a poor culture that drives the wrong behaviour, having an inability to attract and retain good staff, and increasing customer/client churn.

Others may be a weakening brand and reputation, a weakening of relationships throughout the supply chain, no evidence of succession planning, and, the business suffering missed opportunities.

Some badly run companies still turn in a good profit for a few years but it is not sustainable. Inertia is one of the key and profound dynamics that drives SME decline.

In an example, one family-run print company had a very successful second-generation business but had a tendency to think it would continue far into the future without change. Not surprisingly the company started exhibiting many of the symptoms of inertia.

A weak board and weak dynamics in the management team led to introverted behaviour and there was a fundamental failure to ask customers what they think, leading to little or no innovation and advancement.

The company also didn’t invest in machinery or training, which led to both long-standing clients and staff drifting away, a rising cost base and reduced revenue stream.

When situations like this occur, it can often be too late to turn things around and for SMEs it can be fatal because they simply don’t have the financial muscle or brand equity to fall back on.

To thrive, organisations need to become more alert to the things that allow inertia to creep in because every business is guilty of the condition in some shape or form.

Recognising it is step one to recovery. Businesses should also create a strong vision and mission, develop a plan and strategy, re-evaluate team dynamics, consider leadership mentoring, and create safe financial parameters to achieve all of this.

Finally, establish a strong and effective board that should include an experienced finance director.

Smart business owners need this so that they can delegate effectively. Those who are constantly on the phone when on holiday giving permission to staff at home to buy postage stamps are not allowing this to develop.

Brave business owners delegate effectively and accept that 80 per cent will be done well and 20 per cent will be done not quite to your liking.

The answer is to build a strong board and trust their decisions. Change is not going to happen overnight but taking the initiative is essential.