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Doomed from the start. If you’re an entrepreneur or an entrepreneur-hopeful, it’s probably difficult to keep those four words from causing you to second guess your every move as you plan and run your business. They become especially hard to ignore when you consider the fact that less than 30 percent of businesses last more than 10 years, and most failures happen within the first few years of operation. The truth is, many things could go wrong: An ill-conceived business idea, poor planning, lack of capital, ineffective leadership and more. In the high stakes world of running a business, those are the facts.
But there are other important facts about business ownership. Facts that could help you avoid the mistakes and pitfalls that trip up so many others and go on to achieve the success you’ve dreamed of. I call them the Facts of Business Life.
Of course, there are a variety of skills owners need to know in order to make a business work. But after many decades of running my own successful businesses, and learning how other successful owners have created success, I have come to the conclusion that these facts are the seven essential concepts needed to create a successful business life.
Fact 1: If you don’t lead, no one will follow. At first, this statement seems mind-numbingly obvious. But often, “leadership” is one of those words that is thrown around by people who haven’t given much thought to what it looks like in action. Good business leadership begins with defining the destination and direction of your company and deciding how the business should look and operate when it arrives. But it doesn’t stop there. It also involves developing and continuously improving on a set of skills in order to move your business from where it is today to where you want it to be tomorrow.
What’s important to understand is, without effective leadership, your managers or employees have no idea what is important to the owner, what to manage or what success and failure look like. In other words, in order to have effective employees, your business first has to have effective leadership, which has to include defining success and failure based on the eventual destination. Another important aspect of being a good leader is developing a company culture that’s expectations-based, and rewards those who meet and exceed those expectations. The good news about leadership is that the most important aspects can be learned, and it’s essential that owners do so.
Fact 2: If you don’t control it, you don’t own it. Control is the owner’s management reality. If you don’t control your company by defining key tasks and dictating how they must be handled, and “inspect what you expect,” then you don’t truly “own” the business because all you are is a spectator watching others play with your money.
There are two overriding or macro concepts successful owners understand over their unsuccessful competitors. First, great procedures and processes need controls, and these in turn create great employees. This happens because procedures and processes operate the business, and employees operate the processes. This is one of those business basics that owners must understand to be successful.
Secondly, don’t stop at pointing out what should be done and how. Also clearly state and emphasize that there will be consequences when standard operating procedures and processes aren’t followed. If you don’t do this, you’ll be “leading” a group of individuals who follow their own rules and judgment rather than a cohesive company working toward a common goal. Once again, this is one of those business basics owners can’t ignore.
Fact 3: Protecting your company’s assets should be your first priority. Were you surprised because this fact didn’t instruct you to first protect your company’s sales, profits and growth? If so, you’re not alone. But the truth is, assets — which include both tangible and intangible assets — are what power sales, profits and growth.
Usually, owners and soon-to-be owners understand the need for insurance on assets like their buildings and equipment. In fact, bankers insist on insuring specific assets they lend money on like facilities, equipment and sometimes even insurance on an owner’s life. However, successful owners don’t stop at protecting obvious assets. They understand the importance of every asset, because assets represent invested cash, which should be managed to produce exceptional and maximized profits.
Ignore this business fact and your company will underperform — if it can even survive the continual asset write-offs and write-downs, customer abandonment and employee indifference. I believe protecting both tangible and intangible assets to be one of the most underrated and underappreciated ownership issues today, and, if mismanaged, can be one of the most damaging. The key is to understand what all of your company’s assets are, and then guard them closely and work to maximize the profits they represent. Because if you don’t, they will haunt your business and cause financial pain when you least expect it or want it.
To be continued...
(Facts 4 through 7 can be found in part 2 of the story here.)