Small Business Primer – Part 6: Success In The Long Term
Now that we’ve discussed how to attract new clients, it’s time to look to the future…
Beginning a business and getting off to a good start is one thing. Keeping the business profitable after its first, second, and third years is much harder. The statistics say it all: 50% of small businesses fail in the first four years.
Many fail simply because the entrepreneur lacked the qualities, skills and dedication to run and manage a company. They either underestimated the work involved, or overestimated their skills. I can’t offer advice on either of these points, except that you should make sure that you conduct a solid self-assessment before you launch your enterprise. It’s probably a lot easier to realize at the beginning that you weren’t meant to be an entrepreneur, than to learn after two years of hard work, during which you lived on a shoestring and maxed out your credit cards, that maybe this wasn’t the best move you could’ve made.
Entrepreneurship requires fantastic interpersonal and selling skills (recommended reading: How to Win Friends and Influence People, Triggers, Magic Words and Influence). You have to be confident with your own judgment, and you have to follow through on ideas. You have to accept responsibility for your own actions. You have to be proactive, and open to ideas and suggestions from others. And you have to be willing to do whatever it takes to succeed.
Keeping a Balance
The key to continued success lies in managing the long-range goals of the business, while dealing with the day-to-day tasks that need to be handled now.
- Procrastinating on paperwork,
- talking to a lawyer or accountant months after starting your business or
- thinking that your current range of products or services will be profitable forever
are some of the key reasons for failure.
Here are the 7 elements that I’ve found entrepreneurs need to juggle effectively in order to ensure the long terms success of their small business.
1 Avoid Micro-Management
Once you bring people on board, it’s important to let them do their job. If you get too involved in the different projects and tasks which have been assigned to employees, you’ll find that as your staff grows, your workload will increase rather than decrease. Set goals for employees, tell them how results will be judged, and let them know what resources are available. Leave the rest in their hands.
2 Protect Your Cash Flow
From the word go, a solid financial reporting system is critical. Sending out invoices, performing credit checks, working with a collection agency, sending out late-payment notices and keep track of receivables and payables are all critical tasks. Especially in the early stages of a business, it’s easy to forget that not everyone will pay their invoices on time. It’s up to you to ensure that they do, and to have sound procedures in place, ensuring that you collect the cash you’ll need to pay rent, salaries, and expenses.
3 Undertake Constant Research and Remain Vigilant
Businesses don’t exist in a bubble. You’re constantly surrounded by others who watch you, copy you, and improve upon your ideas and techniques. Don’t ever think that you’re immune from competition. In the capitalistic world in which we live, someone with a better or cheaper product or service is just around the corner. The only way to avoid this threat is to be constantly proactive, and to continually re-invent yourself in line with market needs.
4 Be Careful With Employees
Be quick to fire, but slow to hire, the saying goes. Don’t bring on people that you don’t absolutely need, and when new hires don’t meet your expectations, be quick to replace them. Few things can bring a business to its knees as quickly as a few incompetent employees. It may take 3 or 4 hires to find that perfect “VP of Marketing” but it’s a worthwhile process. The right person can do the work of 3 or 4 average employees. This is even more important in sales, where the top 20% of salespeople produce 80% of the sales.
5 Focus on Marketing
Nothing sells itself. Proactively marketing your products or services is essential, though spending too much money on advertising without an eye on the return-on-investment can also kill your business. Unless you have a particularly keen interest in marketing, and you’ve studied the subject intensely, you’re probably better off hiring someone for the job rather than trying to do it yourself.
6 Create a Business, Not a Job
If your business requires your presence in order to function, what you’ve created is a job — not a company. Creating processes for bringing in clients, performing marketing functions, and responding to client feedback are all ingredients to a business. While you may eventually have to hire two or three people to replace yourself in the business, it’s important that you don’t base the business around you and your personality (unless, of course, it’s your goal to do so). There’s no way that you can sell you business, or semi-retire, if you’re irreplaceable. Don’t get caught in the trap of creating a job: build yourself a business!
7 Value Versatility
While SitePoint started out as a media property solely supported by advertising revenues, we eventually added services and products to the mix. While it was never our original intention to build Websites for others, or to publish books and software, we listened to the market and followed their requests. Likewise, you shouldn’t lock your company into one particular area. Listen to your customers, watch what your competitors are doing, and do whatever is necessary to prosper.