I was recently sitting in a room with 30 other small business owners like myself discussing the importance of business owners understanding their financial statements. One entrepreneur asked the CPA in our group an interesting question: "Is there a way I can just start my bookkeeping over and do it correctly from the beginning?" The answer to that question is most certainly (if you want to know how just reach out to me). Then I got to thinking about all the mistakes I have made in growing my own business. Turns out that most small business learn to grow from their mistakes. However, if you could start your small business over today what would you do differently?
Work On The Business
As a small business it is critically important to understand the difference between working on your business and working in your business. Business owners that don't know how to let go of the day to day operations will hit max capacity. There is only so much you can do before you start to become inefficient. Your prospects and customers will notice, service will suffer and your growth will come to a halt.
Working on your business is more than a full-time job. Being the visionary and the executioner in a business is hard work and takes a full time effort. Every time you find yourself handling an operations task you need to stop, delegate the task and get back to your job; which needs to be growing your business.
Accurate Bookkeeping From Day 1
It was interesting to listen to the various business owners' talk about their bookkeeping. They all had one thing in common; they wish they got the help of a professional from day one. There is no doubt you can handle your small business bookkeeping yourself, but you need a professional CPA or bookkeeper to help set up and monitor the proper system. It is much easier to create the correct bookkeeping system from scratch than it is to clean up a bookkeeping system that is a mess.
It is important to stay involved and understand your bookkeeping as an owner but you shouldn't be handling all of the tasks. You want to focus on critical tasks like transferring funds, signing checks, approving reconciliations and financial reporting analysis. You should understand your small business financial reporting enough to know when something doesn't look right. You need to be involved with your business finances enough to know that your P&L and balance sheet are accurate based on the week, month or quarter you just experienced.
I was also quite shocked with how many people didn't understand the importance of financial forecasting and budgeting. More savvy business owners pointed out that forecasts and budgets are what drives their businesses. A forecast puts the owner's vision on paper in plain black and white for everyone to see. Additionally forecasts and budgets set goals for your employees that they need to be held accountable to. A business without forecasts and budgets in place is just running along blind without any measurement of success or failure.
Aligned Organization And Employees
I learned the hard way that an organizational chart that is clearly aligned with the business goals is important. Even when you are a one man business you should still create an organizational chart. As Michael Gerber suggests in his book The E Myth, put your name on every single position on your organizational chart when you start your business. As you hire new employees cross your name off of each position until you are able to hire a CEO. This exercise will help create a vision of where your business is going and what the current needs of your business are.
Another piece of advice you will often hear from successful entrepreneurs is to hire people that are smarter than you. After starting a business that has had many successes as well as horrible failures I can't agree with this more. Surrounding yourself with people that are smarter than you is crucial to the success of your business. Those owners who think they are smarter than all of their employees are just not hiring the right people. The employees that you choose to hire in your small business might be one of the most important steps you take.
You have all heard this phrase before: a business that fails to plan then plans to fail. This phrase may be clichéd, but it is also very true. Most small businesses do develop a financial plan, but very few consider or develop an exit plan. Without an exit plan for your business how do you know when to get out? Better yet how do you know how to properly exit? Most small business owners just assume they will sell their business and that they will find a buyer. However, most small businesses do not define when they will sell their business, exactly how they will do it and to whom. Much like a budget and forecast your exit plan will change over time, but it is an important piece to put into your overall business plan.
There are a few things I would do differently if I was starting my business over today. Some of the items above I have done from day one, others I failed at and learned from my mistakes, and some pieces are still missing. However, I'm working at all of them and each day is a new learning experience packed with practical small business knowledge.