Fact 2: If You Don’t Control It, You Don’t Own It
What does control, or management, mean for an owner? If you asked a dozen business owners that question, you could get as many as a dozen different answers. That’s because control, and what it means, differ not only from one industry to another but from one owner to another. As a working definition, we can use the one offered in Burton Kaliski’s Encyclopedia of Business and Finance (Macmillan, 2002), which defines internal control as “any action taken by an organization to help and enhance the likelihood that the objectives of the organization will be achieved.” Regardless of how you define it, though, it’s important to bear in mind that more companies go out of business because there is too little control than because there is too much. This is a point you cannot afford to ignore.
To my mind, control means developing and implementing procedures and establishing parameters around which employees are expected to do their jobs and be motivated to excel at them. This doesn’t mean that the owner should be a dictator who determines every move each of his or her employees makes. What it does mean is that he or she decides what needs to be controlled, that is, in which areas processes are needed; determines exactly what those processes or procedures should be; and makes sure they are followed. The fact is—and this is something that every business owner knows or should know—that without control a company’s sales, expenses, gross ...