Building Success: Business Lessons from a Small Business CEO
I found a fascinating website while trolling around the Internet recently. It's called Statistic Brain (www.statisticbrain.com) and it has data and rankings on all kinds of topics, from hair loss to consumer spending.
The numbers that caught my eye had to do with start-up business failures. Did you know 25 percent of start-ups strike out within the first year? Thirty-six go down in the second, and 44 percent in the third. Nearly three-quarters of businesses that start in one year will be shuttered 10 years later.
Why? "Incompetence" is the No. 1 reason, according to Statistic Brain. My fun new website cites specific pitfalls including "living too high for the business," "lack of planning" and - this one's a doozy - "non-payment of taxes!"
All those numbers made me want to pat myself on the back. My company is in its 23rd year, which sounds ancient by Statistic Brain's standards. It hasn't always been smooth sailing; there was one terrifying year in the wake of 9/11 that we very nearly went belly up. But I changed course, pulled out of the storm, and emerged much wiser.
Reading the alarming stats on Statistic Brain made me think about what I've learned in my two-plus decades of starting and growing a small business. Much of what I know now came from painful experience; something I wouldn't wish on anyone. So in the hope of preventing others from learning the hard way, I thought I'd share some of the lessons that have proved most valuable to me.
- Be flexible when building your team. You hired Person A to do Job A, but as you get to know him, you find he has talents and skills better suited to another job - possibly even a job you haven't identified! Be open to switching things up. Your business will benefit from having the right people in the right jobs, and your employees will be happier and more productive when they're doing what they're really good at doing. No one I know enjoys work they find too easy - boring! - or too challenging. You'll have a great, loyal team if you play to individuals' strengths.
- Don't spend more than you make. It may sound like a no-brainer, but based on Statistic Brain's numbers, far too many people make that deadly mistake. If your product or service isn't earning enough to pay the bills, it may be time to reevaluate what you're offering. Is there a demand for it? Is it a quality product or service? Do you need to cut expenses - even forego taking a salary - to balance the budget while you build up the business? If you make the mistake of relying on credit or investors to pay for your daily expenses, it's going to be difficult to evaluate whether or not your business model is working.
- If you borrow, invest it in the company. If you're going to draw a salary from that money, don't be tempted to take more than you absolutely need to survive. If your lifestyle is a little uncomfortable, you will be far more motivated to do whatever it takes to make your business thrive.
- Don't allow marketing to fall by the wayside. One of the most important components of any business plan is its marketing strategy. Too often, people don't think that through with the same rigor they tackle concerns like projected cash flow and long-term goals. Or they do put thought and effort into planning for market research, promotion, and positioning - and then never follow through. Marketing is the engine that drives your business; it's what generates the leads that become the sales, which sets the rest of your company's machinery in motion. Without it, you can't sustain and grow your customer base. Marketing is multi-pronged. It includes branding and positioning your business to distinguish it from your competitors. When things are going well, don't make the mistake of deciding, "I don't need to market any more!"
Those are a just a few of the many lessons I've learned starting a business from scratch. While it can be very rewarding, it can also be frightening. I've often said the No. 1 virtue any entrepreneur needs is courage.
Finally, surround yourself with great people and treat them, and your customers, with genuine caring. You'll be surprised by the number of problems that can solve.
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