It happens all the time: two people operate relatively similar small businesses. Both offer high-quality products and services. Both sell them at a fair price. One business thrives, while the other one flounders.
The question is, why?
As bankers, we work with small-business owners every day. The ones that are most successful tend to share the same qualities. From a banker’s perspective, these seven stand out.
1. They are willing to get their hands dirty. Business owners who put “sweat equity” into their businesses tend to enjoy greater success than those who aren’t in the office or shop every day. That may be because hands-on owners value the gratification they get from running their own company and being their own boss. Their day-to-day involvement also may keep them in touch with the nuances of the business and the sometimes subtle nudges needed to position it for growth.
2. They know more. Almost every successful owner brings relevant past experience to his small business. They know their industry, their market and how their company fits into the larger picture. They also are curious, perpetually eager to learn more about technologies, tools and strategies for helping their business grow and become more profitable.
3. They know their own strengths. Successful business owners know quite a lot – but not everything. They know the areas where they excel and surround themselves with people they trust who can help fill in the gaps, whether they are in marketing, information technology or finance.
4. They have a plan. Unless you know where you’re headed, you will never know if you get there. That’s why successful owners have a business plan that focuses on their future. The very planning process itself helps them clarify their vision for their business. They see this plan not simply as a requirement needed to obtain financing, but as a living document that guides short- and long-term decision-making.
5. They are open to change. The best business owners are never satisfied with the status quo. They learn from their own and other companies’ successes and failures. They also appreciate honest feedback and develop a network of peers inside and outside of their business who are willing to provide it.
6. They keep an eye on cash flow. The biggest threat to small-business success is not a lack of profit – it’s a lack of cash flow. Successful owners know managing cash flow means more than just having enough cash on hand to pay the bills. It means knowing where they stand and projecting their income and expenses at least three months ahead, so they are better able to make decisions that help stave off potential shortfalls.
7. They take calculated risks. To grow a business, an owner must be willing to take risks. Entrepreneurs are, by nature, risk-takers. The key is how they calculate those risks. The best keep their eyes on their long-term goals, making decisions based not on what will make the most money today, but on what will ensure their company’s success tomorrow.
Doug Neff is Springfield Region Chairman and CEO of Commerce Bank. He can be reached at Doug.Neff@CommerceBank.com.
