How can we make people better at running their business? The question was posed to me in one of our recent Inbound Networkers weekly meeting's. I was speaking about my experience with the Goldman Sachs 10,000 Small Businesses program and how helpful it was for me. I mentioned that the failure rate of a small business is pretty high within the first ten years of business. Something like 8 or 9 out of 10 small businesses fail within the first 10 years. So we discussed why and I said it is just that most small business owners are not very good at being in business. Being a good business operator does not necessarily mean you are good at running a business. Now let me say that by no means do I think that I know everything about running a business, nor would I consider myself great at it. We are still only seven years old so let's see if I can defy the odds and keep this thing going. What I noticed is that most business owners don't know everything they should about running their business. So how can we make people better at running their businesses?
Why I Hate Most Business Consultants
Ok all you business consultants out there please don't take this the wrong way because some of you are very good at your job. If you haven't read my article titled did you hire a bad business consultant give it a read. In summary my experience with business consultants has been bad because they don't get to know their customers well enough to understand how to help them. As small business bookkeepers we know a lot about our customers, especially the financial habits of them. When I see clients hire a bad business consultant they come in and assess their new client and then typically start slashing unnecessary expenses. That is a great approach if you actually know what you are doing. However, in the end the consultant hits them with a huge bill for their services, which really does nothing to help the bottom line. What you should consider is asking your bookkeeper for some business consulting advice because they actually know your business.
Work On It Not In It
Its so clichéd yet so true; work on your business not in it. Many small business owners are great at what they do, but that doesn't necessarily mean that they are a great business owner. Great business owners are excellent leaders and good delegators. They understand that the key to scaling their business is to work on the big picture tasks, not every little detail. Successful business owners focus on strategy, staying relevant, competitor and financial analysis, budgeting, along with plenty of other big picture tasks. Small business owners get started because they are good at something, but you have to be good at running your business to really make it in the long run.
Your Financials Are Important
One thing that blows me away is how little the general small business owner knows or cares about the financial aspects of their business. One of the biggest takeaways for me and my colleagues in the Goldman program was that most small business owners don't track or analyze the financials of their business enough. Many of them don't have the proper bookkeeping system in place to even begin to properly analyze their business. Financial reporting and analysis is the backbone of any business. Great owners realize the importance of their financial reports and use them as a roadmap to success for their business. While you may not know how to generate the financial reports you should be able to analyze them. We have a lot of great clients that are not interested in the bookkeeping work that goes into their reports, but they care a lot about end results.
If you don't understand financial accounting and reporting then you need a good person on your team to help you with that aspect of the business. Not everyone is good at everything and great operators recognize and admit to weaknesses and then hire people to help them in those areas.
Clear Vision, Goals and Execution
Good business owners have a clear vision of where they want to go. They have set goals that they revisit often to make sure they are on track. A financial forecast and budget is absolutely essential to the success of your business, otherwise you have no idea if you are hitting your goals and expectations. The other thing with budgets is that you actually have to look at them and compare actual performance to your budget. I see a lot of businesses create a budget and then file it away somewhere and never look at it again. Towards the end of each year I spend my time working on budgeting, not on year-end bookkeeping tasks. After we have created our budget based upon both past performance and our goals we enter it into QuickBooks. I would estimate that I look at budgeted vs actual performance on average about 3-4 times per month...yes per month. I bet many business owners would be lucky to look at it once a month or quarter. Our performance is that important and I know that we need to stay on budget (both income and expenses) in order to hit our end goals.
Where most business owners fail is on the execution. Businesses fail to execute on all sorts of things like new ideas, financial analysis, marketing, and general operations. The ability to execute is what sets apart successful business owners from those that fail. Why? Because executing is hard, risky, and takes a lot of confidence. How many times have you had a great idea for a new product but you never followed through on it? Did you then see that product come out on the market in the next few years and make a ton of money? And you have regretted it since. So why didn't you follow through on your idea? You didn't execute on your idea. Developing an idea is one thing but executing on that idea is a whole other ball game.
So how can we make people better business owners? Again by no means am I an expert. A few of the things that I have noticed are that people get caught up in the wrong things, rather than working on the big picture. Additionally many business owners don't know what financial reports they should be looking at. Lastly, people fail to execute on their vision and the goals that they have set.
So what advice do you have to help small business owners get better at running their business?
Photo Credit © Dollar Photo Club / Jane