by Rick Leibowitz (February 2006)
“Leaders are the ones who keep faith with the past, keep step with the present, and keep the promise to posterity.” Harold J. Seymour
As a fledgling small business owner, I faced many humbling experiences. I quickly realized that I had to wear many hats to succeed. After all, the average small business owner has to be an operations manager, financial professional, marketing manager, human resource manager, customer service representative, manager of investor relations and, most importantly, chief executive officer. Below are some of the lessons that experience taught me:
Lesson #1 - Accept Responsibility: Whenever discussing leadership, I think of the Pixar animated movie, “A Bugs Life.” In this movie, a young princess ant is making an excuse to an angry grasshopper for not fulfilling a commitment. The lead grasshopper, acted with the voice of Kevin Spacey, cuts off the young “leader in training” ant during her excuse and says, “The first rule of leadership. It’s always your fault!”
As a small business owner, you must accept responsibility for all of the actions of your company. Things beyond your control may happen to your business, but how you react to those circumstances is completely within your control. One of the first decisions you make as a small business owner is self determination. If you are faced with a serious challenge, you are ultimately the founder of that business. When you assess blame for circumstances that you feel are beyond your control, you are forgetting your commitment to self determination that you made when you chose the path of small business ownership.
Truly effective leaders learn to take control of situations, no matter how dire they may seem, and find the best possible solutions. In reality, sometimes even the best solution is less than desirable, but a leader will always put difficult times into perspective. Furthermore, the best leaders recognize that temporary set backs can become positive learning experiences.
Lesson #2 Monitor the Vital Signs of Your Business
A business is an organism that survives on positive cash flow, grows through profitability and maintains strength through increased net worth. If you are not familiar with these basic accounting principles, you should become a quick study; you are the one responsible for health of your business (see Lesson #1) and your financial statements indicate your vital signs. While you may hire a bookkeeper or an accountant to help you track finances, it is up to you to determine what indicates a healthy business. Know your key indicators for success and, on a regular basis, check to ensure that your business is in a healthy operating condition. While every business has different measures of success, at the least you should know your average daily sales, fixed monthly expenses, average cost of goods as a percentage of sales, accounts receivable balances and accounts payable due.
For more advanced study of your financial situation, compare your financials to industry standards, such as Robert Morris & Associates (RMAs) or financial statements on BizStats.com. Your financial advisor or your local SBDC counselor can help explain how to do financial analysis, but the maintenance and decision making can only be done by you.
Lesson #3 Grow, Always!
Customers are the core of your business revenues and revenues will only grow if you actively grow your customer base. There are only two ways to increase growth -- increase your number of customers or increase the amount each customer purchases from your business. These are two very basic principles that often go unnoticed by many small business owners, but should be at the core of every business decision made. Whether it is choosing new inventory, investing in new production equipment, hiring personnel or choosing which advertising medium to use, the determining factor for return on investment will be increased revenues.
Customers are a precious resource and need to be treated as such. Take good care of those you have and continually try to bring more into your business. Remember, if you do not foster growth, your competition will.
Lesson #4 Build a Team and Delegate
Every business requires a successful team to succeed. Whether it is through employees, contracted services or even vendors, someone is going to have to help your business with some of the many responsibilities highlighted in the introduction.
If you want to build an effective team, the first step is planning. Know what you need most and budget resources you have available for assistance. Always interview candidates (yes, even vendors and professionals) and choose those who can help you best meet your expectations and needs. Be cautious not to pick price over value in making your decisions.
Whomever you choose to be part of your team, always remember to make your expectations clear, and with employees, provide clear direction regarding the mission of your company and expected output. Training and monitoring your employees are critical investments to your success. If you provide the right guidance with the right people, you should be able to delegate responsibilities and build a team dynamic that increases productivity and leads your business to growth opportunities.
Another thing I learned about leadership is that what you know and say is not nearly as important as what you do. There are many great resources to provide leadership education, but your investment of time studying is not nearly as important as what you practice in your day to day life. To quote Ralph Waldo Emerson, “Who you are speaks so loudly, I can’t hear what you are saying.”