Less than 30% 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. 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. This 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.
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. 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.
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. Successful owners understand the two macro-concepts associated with this.
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, business owners understand the need for insurance on assets such as their buildings and equipment. In fact, bankers insist on insuring specific assets they fund. 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.
Fact 4: Planning is about preparing for the future, not predicting it.
Nobody knows what tomorrow, next week, or next year will bring for your business. But you can make educated guesses based on the most current, accurate information available as well as your own past experiences, and this should be an ongoing process. Effective planning is a mix of science (gathering pertinent information) and art (taking that information and turning it into a plan that will move your business from “here” to “there” over a specific time period).
Being able to plan better than your competitors can give you a significant competitive edge in the market. Ford Motor Company is a great example. In 2008 and 2009, its competitors, GM and Chrysler, ran out of cash and needed taxpayer bailouts to avoid bankruptcy. But not Ford. Years prior to the credit crunch, Ford began to restructure its debt and raised billions as it continually added to cash reserves. Was this luck or good planning? Industry insiders will say good planning. The point is Ford knew, as you should, that planning is important because it focuses owners on what’s important and it prepares them for what lies ahead.
Fact 5: If you don’t market your business, you won’t have one.
Maybe working to market and advertise your product isn’t your cup of tea. Or maybe you believe your product is so great that it should speak for itself. If so, too bad — you’re going to have to do it anyway. The bottom line is, if people don’t know about your product, you won’t be successful.
You have to make the necessary effort to connect consumers to your company. And when you do, you’ll begin to see marketing as the investment it actually is, rather than the expense that less successful competitors think it is.
Fact 6: The marketplace is a war zone. Every company has competitors, and if it doesn’t and it’s successful, it soon will.
Successful owners know they have to fight not only to win market share but to retain it as well. Develop a warrior mentality and maintain it for as long as you’re at the head of your business.
Selling and sales in any industry is serious business. It’s take or be taken from. If that isn’t a business war zone, then I don’t know what is.
Fact 7: You don’t just have to know the business you’re in; you have to know business.
Yes, of course you need to know the inner workings and nuances of your particular industry if you want to be successful. But you also need to understand the various aspects of business as it is more broadly defined, such as accounting, finance, business law, personnel issues, and more, and how all of these impact each other and the decisions you make.
Having tunnel or limited vision as far as business knowledge is concerned is akin to dropping out of high school. In doing so, you limit your possibilities for success and how great your success could be. But at the end of the day, what is most important is not how much you know, but what you know and what you do with that knowledge. For example, it’s important to know what’s going on in your market, but it is just as important to know what to do with that information and how you can translate it into more sales and gross and net profits — something that can’t be done with limited business knowledge. And remember, it’s an owner’s responsibility to make sure what you’re learning is correct and relevant.
Ultimately, I don’t believe that any entrepreneur can succeed — or at least reach his or her full potential — without knowing, understanding, and applying these seven Facts of Business Life. It’s equally important to understand how these facts are interrelated.
For instance, being able to develop strategic plans or market your product will mean little if you don’t have a good grasp of business in general. But I promise, if you commit yourself to understanding these facts while being prepared for their implementation to change as your business goes through its inevitable life cycle, you’ll be creating a best-odds scenario for success.
Bill McBean is the author of The Facts of Business Life: What Every Successful Business Owner Knows That You Don’t (Wiley, October 2012, ISBN: 978-1-1180949-6-9, $24.95, FactsOfBusinessLife.com). Bill began his career with General Motors of Canada Limited in 1976. After holding several management positions with GM, in 1981 he accepted a position with the Bank of Nova Scotia (ScotiaBank) as manager of a sizeable commercial lending portfolio. Two years later, however, GM approached him about opening a new automobile dealership in Yorkton, Saskatchewan, and, along with ScotiaBank, offered to lend him the required capital. Accepting the offer, Bill began his first business as a “start-up” the following year, beginning with 10 employees.
Managing these challenges successfully will help you and your business to reach full potential.
