Many people think about becoming entrepreneurs.
A potentially rewarding life, but running a small business is hard work.
Entrepreneurs must be focussed and plan thoroughly if they wish to succeed.
Young entrepreneurs should also try to emulate successful small business owners and innovators. What works for them and the lessons they have learned.
Today we discuss specific tips for entrepreneurial success.
These come courtesy of Ink from Chase’s, 10 Tips From a Successful Small Business Owner.
It is well worth a read.
A few thoughts from my side on the article follow.
Systems and Staff
The article recommends creating “systems that can run without you.” Also, to “hire great employees, then get out of their way.”
Good advice and the two points go hand in hand.
If you want to stay small and work 100 hour weeks, keep everything to yourself.
If you want to grow and (eventually) enjoy life a little, you need to delegate to some extent.
That means introducing strong systems and hiring staff to whom you can offload responsibility.
Link Employees to the Business
With excellent employees, consider giving them a piece of the pie. An ownership interest, profit sharing, phantom stock options, real stock options, are a few of the common ways to let employees become part of the company.
Without a personal interest in the business, excellent employees may become less excellent over time. Those who work hard and contribute to the profitability of small companies may begin to feel that their efforts only make you, the owner, richer. After a period, disillusioned employees look elsewhere for work. You may end up losing a key cog in your machine.
However, staff with a vested interest in how the business does will likely work hard to make it a success. And success means more dollars in your pockets and possibly more time for an outside life.
That said, you need to be extremely careful about who shares the wealth. Mission critical employees, possibly. But there must be value for you to do so. It makes little sense to dilute your ownership and control without a specific purpose and result.
Also, you need to pre-determine what happens when an employee with an equity interest or profit-sharing arrangement departs. Spend some money on a first-rate lawyer and make sure all employee contracts are tight.
Always have contingency procedures in place. For everything you do.
If you fail to plan, you plan to fail.
Focus, Focus, Focus
Keep your eye on the ball at all times.
The article refers to this in three separate points.
“Set specific goals, then take time to review them.”
“Don’t waste time on tasks that you can outsource.”
“Stick to your core business.”
Stay focussed on your core business and area of expertise.
Know where you want to go and thoroughly understand how you want to get there. The world is a fluid place. Conditions change constantly. Do not lock yourself into a course of action, but be prepared to adapt as circumstances shift.
Always have contingency plans. Know what you will do when, not if, a situation does not go as anticipated.
Effectively and efficiently utilize external resources to achieve the best return for your time and money.
For example, maybe you lack the funds to hire a bookkeeper. In that case, you may need to inefficiently perform the tasks yourself. Perhaps you need to spend 20% of your time on bookkeeping. Could (should?) that time be better spent generating new revenues for your business?
And what about if your lack of accounting knowledge creates errors on your financial statements and tax returns. This ineffectiveness may cost you real money.
Always consider both efficiency and effectiveness in any analysis.
Performing work outside your core business or expertise may save you money in the short-run. But the opportunity costs may be expensive over time.
Plan, review, adjust. Repeat as necessary. But do not lose focus on the key issues.
I could include this with outsourcing parts of your work, but I want to highlight this point.
Because I think this is a huge problem for many new entrepreneurs.
Most people are good at one or two things. Maybe you have a great idea for a business. But do you possess the business development, financial, legal, accounting, tax, marketing, etc., skills necessary to turn the idea into a profitable venture? Probably not.
Some skills can be outsourced to external parties. But depending on your business idea and personal expertise, it may be useful to partner with somebody who fills in any large gaps.
What you outsource and what you partner up depends on many factors. Keys include: how critical the expertise is to your core business; cost of outsourcing versus insourcing; availability of external expertise; short and long-term business objectives; your own skill set.
For example, at one time I was involved in a start-up junior oil company. My experience was finance, both in general and oil specific. Probably not enough to run an oil company myself. Far from it.
My initial partner was a tax expert with strong experience in oil and gas. This was valuable as we intended to acquire assets using tax effective strategies. Sure I could have outsourced this skill set (or he could have outsourced my finance expertise!), but the scope of work involved made it cost effective to conduct in-house. It is one thing to outsource my personal tax return to a tax accountant. It is another thing to outsource a focal point of the business itself.
So we had a finance guy and a tax guy, both with some knowledge of the oil patch. But recognizing a skill gap, we brought in an oil landman as the third partner. Further, we filled out our Board of Directors with senior oil professionals, so that we had competent internal advice. Again, we could have hired consultants on an as needed basis. But a landman and oil patch executives were critical for immediate success.
Initially we concentrated on tax-effective deals. Periodic consultants in other oil related areas served our needs. But as we grew, it became more efficient and cost effective to bring in additional expertise. So we partnered full-time with a geologist and engineer.
As a result, we built an efficient and effective team over time. Each person with complementary skill sets to offset our initial gaps.
I think the underlying keys from the article and my commentary are as follow:
Plan, plan, and plan some more.
Know what you want to accomplish in your business venture and how you intend to get there.
Plans cannot be rigid. They must be adaptable to changing conditions. Conduct periodic reviews and refine as needed.
Never be surprised by any unexpected events. Have contingency plans in place to deal with unforeseen issues that (always) arise.
You fail to plan, you plan to fail.
Focus, focus, and focus some more.
Keep your eyes on the prize.
Focus on your core business.
Everything you do in your business should be to achieve your goals.
All else is probably noise. Do not get distracted by the small things.
Get the most from your time, energy, and money.
Always consider the effectiveness and efficiency of what you do. And do not forget about opportunity costs in your analysis.
Outsource functions that are inefficient or ineffective to conduct in-house.
Add new talent internally when the benefits outweigh the costs.
Hire strong employees and tie them to the company’s success.
Work to continually strengthen and broaden your own skills.
Implement efficient systems to better assist in reaching your goals.
Create a work environment that promotes success.