Wednesday, April 16, 2014

MANAGEMENT: The Five Key Skills for Entrepreneurial Success


Usually when you read a headline like this, you expect a sales pitch for the writer’s products or services that will help you avoid the what the author claims are the leading causes of small business failure.  The author’s conclusions may be that most business failures are due to a lack of a business plan.  Sorry, I’m familiar with the research on business failures, and lack of a business plan isn’t listed.  Nor is lack of an SEO program.  Nor is the lack of specialized software or any of the myriad products and services offered in the small business formation marketplace.

The primary causes of business failure according to a century plus of tracking surveys by the business credit firm, Dun & Bradstreet, are two in number.  And they make up two of the basic skills any prospective business owner MUST have if he or she is to be successful.  The two leading causes of business failure are:

1.  Lack of financial management skills and experience (often combined with poor decision making).
This, again, isn’t rocket science.  To succeed with a business on any scale you must be able to read and interpret the three basic reports common to all businesses, organizations, churches, governments and Cub Scout Troops:
    • The Profit and Loss Statement.  This answers the intriguing question, are we making money?
    • The Balance Sheet.  Which answers the starting question, do we owe more than we own?
    • The Budget.  Your personally maintained crystal ball which attempts to predict with reasonable certainty, how much money you need to stay open next month or next year, and how much you feel your business will bring in?

Doing your own books is not part of this skill.  Being an accountant or CPA isn’t necessary.  My father-in-law with his eighth grade education can tell at a glance whether a business is doing well and what problems it has simply by scanning the first two reports.  It’s an acquired skill anyone can learn at their local SBDC or community college. 
Budgeting, on the other hand, is something the business owner must do him or herself.  The only way you can incorporate budget numbers into your day to day is to keep your budget yourself – at least until the point your business is too big for this.  In the beginning?  It’s something you do, and no one else.
2.  Lack of marketing management skills and experience (often combined with poor decision making.)
It is the small business owner’s job – and no one else’s – to sell the business's products and services.  You can hire salespeople, but unless you have the sales and sales management experience to guide their efforts, you may as well toss the money out the window.  This is knowledge you can pick up at your local SBDC or community college, and from there – it’s practice, practice, practice.
According to this research, 89% of all business failure is due to these two factors and these two factors alone.  Throw in “Acts of God”, and you’re pretty close to 100%.  

I mention five basic skills, and these are but two. Here's three:

3.  To be successful as an entrepreneur you must have a good mindset.  
A mindset is a combination of attitude, expectations, understanding what your time is worth, and the skill to manage attitude, expectations and time.  While we haven’t time or space here to discuss how to do this, I do teach some basic, scientifically proven techniques for self-managing.  This includes simple mental imaging exercises that anyone can learn, understanding the nature of goals and expectations, and computing in simple dollars and cents what every hour you have available to you to invest in your enterprise is worth.
So that’s three.

4.  Four is developing the skill of asking questions, reasonable questions.  
Traditionally, these questions were organized as a business plan, but NOT the modern form of business plan.  What’s wrong with the modern business plan?  Besides being an exercise in wishful thinking and mental masturbation, nothing.  Far too many prospective entrepreneurs buy expensive software or hire expensive services to write “The Business Plan” to present to bankers, Angels, Venture Capitalists and whoever else they can pigeonhole long enough to read their fiction.  Which they won’t, because they know the damn thing was written using expensive software or by high-priced writers and has no more connection to your business than the book, “Huck Finn”.  At least Huck Finn has a plot.  Your Business Plan doesn’t, and your ending is very predictable.
What does this rant have to do with asking questions?  Well, originally, a business plan was an organized set of answers to questions that only the business owner and closest associates or advisers would ever see.  It was a living document that was used and updated and used more.  The questions aren’t rocket science nor do they require an MBA to answer.  Simple questions like,
    • “Who is the prospective customer?”, 
    • “Where do they live?”,
    • ”What price are they willing to pay?”,
    • “What competition is there?”,
    • “What will it cost to start and operate this turkey?,
    • “How do we make this happen?”, and so on. 
 Very basic commonsense questions that anyone, including me, can pose and find answers for – usually with a reasonable investment of time and a little money.
Skill five isn’t really a skill.  It’s an attitude that in my workshops I explain using the “John Wayne – Bruce Willis I-don’t-need-no-stinkin’-help Misapprehension.”  In their many movies, John and Bruce were usually pitted alone against the world, and too many entrepreneurs, especially men, have picked up this silly attitude. 

Starting and running a successful business isn’t a gunfight in the Old West.  For one thing, despite the history that Hollywood teaches, there were only five or six true “walk-down” gunfights during that entire fifty-year period.  Researchers starting with Napoleon Hill through today clearly document that people who understand that running a business is a collaborative enterprise – even for the self-employed – are far more likely to succeed.  (And as women are by socialization trained from a young age to be collaborative, women owned business are, according to all research, more stable, more profitable and last longer than businesses run by men.)

5.  So the fifth skill anyone who craves success needs is the ability to ask for help.
It's critical to seek out other’s opinions and to have a circle of professional advisors near at hand when needed.  Yes, this is an attitude, and could be included in mindset, but it is so critical to an entrepreneur that is deserves a separate listing.  Business management is a huge field, and no one, no matter how well educated and experienced, can know it all.  The successful know who to call, who to talk with, and the benefits of doing so.

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