The Secret of Success for Small Business Owners
Experts say there's one way to boost your odds as an entrepreneur
Few experiences are as exciting, rewarding and, yes, terrifying as starting and running your own business. Many people in their late 40s, 50s, and early 60s are learning that first hand: the economy has led them to take the plunge into entrepreneurship, either because they were laid off or because they just want more control over their work lives. In fact, boomers are starting businesses faster than any other age group, according to analyst Vivek Wadhwa.
Why do some small businesses soar while others flop?
It’s a question I’ve asked myself often over the past two decades as I’ve worked with, written about and studied entrepreneurs. It’s also a question that my Next Avenue weekly blog posts will address frequently, unearthing resources to help your business succeed. And I'll be sharing “How I Did It” stories of people who’ve recently opened shop. Whether your goal is to be the next Silicon Valley sensation, run a bed and breakfast, or start a consulting business from your spare bedroom, you’ll find advice to help you do it.
One of the most important indicators of business success is one I’ve heard from hundreds of venture capitalists, angel investors and small business lenders: The need to have a stellar team.
When Profit Dynamics Inc. a research and consulting firm in Forest Hills, Ariz., asked 500 venture capital firms about their key criteria for investing in a new business, 52 percent ranked “quality of the management team” as critical.
Once potential financiers see friction in the business or find that no one is spearheading key roles (operations, technology, finances and sales), they won’t help the firm get off the ground. And without money, the business is doomed.
So don’t try to go it alone. Finding employees, business partners, or independent contractors whose skills complement your own will make your company stronger and grow faster. This requires admitting there are areas of running a business that you don’t know or skills that you lack.
Yes, it’s painful to admit this. Being honest with yourself can, however, save you heartache — not to mention boatloads of time and money.
Here are the types of people you’ll need to succeed, and how to find them:
Operations Master: This is the person who’ll oversee what your business does and how the work gets done. Although the entrepreneur often takes on this role, you can also seek operations help from suppliers. A courier service can help you manage shipping and logistics. Equipment and materials suppliers can provide advice to help you better coordinate manufacturing, inventory, and other day-to-day challenges.
Tech Guru: Your technology expert is a critical part of the team, even if your company isn’t a tech-based business. After all, virtually every business relies on technology in some way today — from its website to its social media presence to its computers, smart phones and other gizmos.
Technology is also an area that prospective lenders look at closely. So if your tech talent isn’t up to snuff, you could find yourself short on cash. Either make sure you have someone in-house who’s great with technology, or find someone. Ask your financial adviser, friends and former colleagues for recommendations.
Financial Whiz: This person controls the ebb and flow of cash, monitoring what comes in and goes out on a daily or weekly basis, as well as tax planning, hiring, and reinvestment in the business.
Your accountant could probably fill this role. But over the past few years, a cottage industry of part-time and independent chief financial officers “for hire” has emerged. To find one, search online for “part-time CFOs,” then start interviewing the most promising candidates. Ideally, you’ll want a certified public accountant.
Mentor: Having someone who has run a business successfully can be invaluable for shortening your learning curve. If you don’t have a friend or colleague who can provide guidance, look for a free adviser from the SCORE, a nonprofit that partners with the U.S. Small Business Administration. SCORE matches you up with people who have experience in your field.
CEO Peer Group: A chief executive peer group is a collection of local people who own businesses. When I ran a small PR agency, I found it extremely helpful to have this group of fellow business owners to brainstorm ideas and to give me feedback on issues I was facing. And, sometimes, blowing off a bit of steam in a safe environment with people who understand the challenges you’re facing can relieve stress better than a deep tissue massage. (Just make sure there are no competitors in your group or you’ll be reluctant to share.)
Find a local CEO peer group by asking other business owners or by contacting business groups like your local Chamber of Commerce. You can also form your own group by inviting business owners you respect to meet monthly or quarterly. This executive roundtable, along with the rest of your team, is likely to up your odds of being a small business winner.