I wrote recently about research that showed 66% of SME owners don’t believe today’s education system gives children the skills they need to run a successful small business.
Backing this up is the latest MYOB SME Snapshot survey: 38% of business owners said trial and error was the No. 1 method for gaining business skills in the start-up phase – ahead of other important information sources such as accounts and financial advisers (32 per cent) and professional networks (also 32 per cent).
Start-ups will always learn on the job. Cash is tight – so you’re reluctant to engage professionals (such as accountants, business advisers and financial advisers) on an ongoing basis; and you probably don’t have the cash flow (yet) to employ experts to manage key aspects of your business. It’s up to you.
While I understand this better than anyone – I was in that very position 18 years ago when we first started our business – the sooner you can leverage the expertise of professionals, the sooner your business will hit its straps. (And the sooner you’ll achieve what you went into business for in the first place: a greater share of the profits, a more flexible lifestyle, and greater control over your destiny.)
These findings, coupled with the previous research I mentioned in the intro, highlight a real opportunity for these professionals to provide practical training for start-ups.
What start-ups (and any business owner, really) can do to fast-track their success:
I believe there are 9 steps to success that every business – whether a start-up or a thriving enterprise – needs to master. If you can set your business up with these in mind, you’re half way to building a brilliant business:
1. Know your business
The first thing I encourage all small business owners to do – and especially start-ups – is to articulate your ‘why’ – the reason your business exists (and the real reason customers buy off you). Crucially, you need to communicate it to your key stakeholders: team members, clients, prospects and suppliers.
Then develop a long-term vision for the business – and share it with your team (so they buy into it and strive towards it with you) and your clients (so they want to be a part of your growth). Finally, set clear, measurable goals that help keep you on track to achieve your vision. Celebrate your wins along the way. Ensure everyone understands how their role contributes to your overall success.
2. Master the 4 pillars of business success
Your People, Processes, Customers, and Financials are the foundations on which any successful business is built. The first three pillars drive your financials; your financial success depends on your ability to fully understand your business, your industry, your competitors and your target market, and to attract (and get the most out of) outstanding team members. Without being crystal clear on the first three pillars, your financials will just be a guesstimate.
3. Start with the end in mind
This is one of Covey’s 7 habits of highly effective people. Even if you don’t plan to sell your business, build it like you’re going to. The elements that create a business people want to buy – strong cash flow, great profitability, amazing people, loyal customers, solid systems and processes, and a business that doesn’t rely on the owner – are also the keys to shorter term success.
4. Plan for success
A 1-page business plan each year will help you articulate your objectives, and what you need to do to get there. This ‘activity compass’ becomes especially valuable when owners inevitably get caught up in the day to day doing of your business in the tricky start-up phase.
The cornerstone of financial success is a budget or cash flow planner. These tools enable you to manage incomings and outgoings to ensure you can meet future expenditure needs. I advocate you budget like a big business and use bottom-up budgeting where you set a profit target and work backwards from that to determine required revenue and expenses.
5. Focus on the things that matter
Many business owners take a scattergun approach, spreading their limited resources too thin and overcommitting to inefficient activities. Consequently, they wind up being beige. Focus on what your business does best, and what’s critical to success – and be awesome at it. Determine your key drivers of success – and smash them. Avoid being sucked into the ‘doing’ vortex and making reactionary rather than strategic decisions.
6. Operate in your genius
Start-up owners need to focus on your personal strengths so you can maximise your effectiveness and avoid the trap of trying to do it all yourself. Having the right team members who are trained and have clear processes will help. And, as the MYOB SME Snapshot shows, surrounding yourself with expert advisers is also vital. They can help you determine what action to take, and when; they can also hold you accountable to ensure you do what you said you would (and not let ‘stuff’ distract you from the big picture).
7. Stay on track
The most common mistake I see from small business owners is a lack of information. Without up-to-date knowledge of cash flow, sales, margins, breakeven points, your most profitable products / services, and the KPIs (Key Performance Indicators) you need to reach to achieve your strategic goals, your chances of success are diminished.
Cloud-based accounting software enables you to keep track of these key metrics anywhere, any time, on any device – I don’t know how any business operates without it.
8. Don’t be all things to all people
Sometimes you need to say ‘no’ to a customer. This can be difficult for start-ups (even for established businesses who still have that ‘start-up’ mindset); but beyond a certain point, chasing every dollar will be counterproductive to your long term strategic growth. You need to focus on attracting and servicing your ideal clients, and develop products and services that best meet their needs in the most efficient and profitable manner.
9. Take action!
The best planning, the most amazing people, a killer product… they’re all worthless if you don’t execute. Taking risks is inherent in small business operation; if you aren’t prepared to make a tough call, sack an underperforming team member, or admit defeat and change tack when you’ve exhausted all avenues, then I recommend you go get a normal job. Being a business owner is tough; you WILL make mistakes… but failure is feedback. It helps you grow, evolve, get things right. It helps you succeed.