Definition of a business owner: Someone who works eighteen hours a day for himself or herself…to avoid working eight hours for somebody else! Building a business can be tough; keeping it going and turning a profit doesn’t always get any easier. It takes a lot of hard work and determination…with no guarantees.
Nearly a million businesses start each year. According to Small Business Administration stats, almost as many go belly up. Worst of all, many more limp along…never quite failing, but always struggling to stay ahead. They generate income, but not necessarily financial security for the owners and their families.
Successful business owners have a number of things in common in terms of how they think and manage their companies. Complete the following self-quiz to find out what you’re doing right and where you need to focus your attention.
Respond to the following statements, using a scale of zero to 10 — 10 for “always” and zero for “never”:
[ ] I have written goals and a plan to achieve them. Ongoing success is the result of a plan, not luck. If you don’t know where you want to go and how you intend to get there, you won’t. This means broad vision on one hand…attention to minute detail on the other.
Recommendations: Do a business plan by mapping out your goals for at least the next 12 months. Then list no fewer than three specific activities that will help you achieve those goals.
[ ] I work hard and pay my dues ungrudgingly. Some people say the secret to business success is nothing more than showing up early every morning and staying late every evening. Success doesn’t necessarily go to the best and the brightest…but to the most determined.
Recommendation: Put in just one extra hour each day. Over a 50-week year, this will add up to a six additional 40-hour weeks.
[ ] I am a business person. Most small business owners are product or service specialists, not professional business managers. But the more they learn about proven business concepts and techniques, the more profitable and productive their companies will become.
Recommendations: Devote 30 minutes a day to reading a book or magazine on business; attend at least one seminar a year on innovations on your industry or business management in general; consider college and university courses on business management.
[ ] I work hard to control costs and keep overhead down. The bottom line is just that …the bottom line! Don’t confuse bigness with financial soundness. It’s the size of your profit margin, not your payroll, that counts. A company that generates $2 million of revenue, but loses $50,000 in the process, won’t be in business long. But one that produces $200,000 and nets $50,000 in profits is a winner.
Recommendation: Keep good records and review them regularly. Some owners go over the numbers on a daily basis. This helps them spot potential trouble areas early. At the minimum, have a full-scale books meeting at least once a month.
[ ] I have adequate cash flow. The primary complaint of small business owners is cash flow woe.
Recommendation: Build up an operating fund that eventually equals at least one month’s expenses. If necessary, reduce your take-home temporarily. Bonus: Business owners who do this tend to sleep better at night…feel more secure.
[ ] I avoid excessive debt. Credit can be your best friend or your worst enemy. Many businesses fail because they go into debt to finance a vague idea, without a clue as to how the money will be repaid.
Recommendation: Borrow only as part of a specific plan to boost the productivity of your business, with a clear strategy for repaying the funds. Never attempt to borrow your way out of debt.
[ ] I’m not afraid to borrow money when it is to meet specific, clearly defined objectives. Just as debt can put a company in the hole, the number one reason most companies fail is undercapitalization. Borrowed money can give you room to maneuver, to achieve your objectives.
Recommendation: Maintain a credit line at your lending institution. Also, if you need additional capital to introduce a new product line or service — and have done your homework carefully — don’t be afraid to use borrowed funds.
[ ] I believe in SOP. Successful companies have “standard operating procedures” for virtually every aspect of the business. They learn the best way to do a process, then standardize it into a working system. That way, time is not spent reinventing the wheel when it comes to marketing, administration, paying bills, hiring employees, etc.
Recommendation: Look for ways to simplify, standardize and systematize as many routine operations of your business as possible.
[ ] I delegate as much responsibility as possible. While your company may never be able to do without you, its long-term stability will be enhanced by broadening the base of people who have the ability and authority to work without your direct supervision.
Recommendation: Delegate what you can, not just what you must. Give employees as much responsibility as they are willing and able to handle.
[ ] I practice controlled paranoia. Successful business owners constantly look for trouble and problems, so they can jump on them early, before they become serious.
Recommendations: Review your books regularly. Ask your customers what you’re doing wrong…or could do better. Seek out criticism, not praise.
Review your answers and tally your score. Your total reflects your company’s probability of achieving long-term financial stability as it is currently operating. Boost your score by improving one item at a time, until you’ve boosted your score to an acceptable level.
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