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7 Cornerstones of Small Business Success

cornerstonesOnly about one of every 10 businesses started will reach a 10th anniversary and most failures happen within the first few years. Lots can go wrong: an ill-conceived business idea, poor planning or execution, bad business model, lack of capital, ineffective leadership, and poor location, among others.

But business owners who succeed know how to avoid the mistakes and pitfalls that trip up other entrepreneurs. They get the foundations right. Bill McBean is one such business owner. He grew a highly successful series of car dealerships in Texas and went on to write about his success in “The Facts of Business Life: What Every Successful Business Owners Knows that You Don’t” (Wiley 2012).

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Here are McBean’s seven “tried and true” foundations for building business success:

1)    If you don’t lead, no one will follow. Good business leadership begins with defining the goals and direction of your company, and deciding how the business should look and operate. It also requires that you develop and constantly improve the skill sets you need to move your business forward. You must develop a company culture based on expectations and that rewards those who meet and exceed those expectations.

2)    If you don’t control it, you don’t own it. If you don’t control your business by defining key tasks and dictating how they must be handled, you don’t truly “own” the business. You’re more like a spectator watching others play with your money. “Great procedures and processes need controls, and these in turn create great employees,” says McBean. This happens because procedures and processes operate the business, and employees operate the processes.

3)    Protecting your business assets should be your first priority. Surprisingly to some, sales, profits and growth don’t come first. Assets – which include tangible and intangible assets – are what power sales, profits and growth, so they come first. And successful owners don’t stop at protecting obvious assets (with insurance, for example). They understand the importance of every asset, because those assets represent invested cash which should be managed to produce maximum profits.

4)    Planning is about preparing for the future, not predicting it. Effective planning is a mix of science (gather key information, for example) and art – taking that information and turning it into a plan that will move your business forward over a specified period of time. Nobody knows what tomorrow will bring. But you can make educated guesses with the right tools and effort.

5)    If you don’t market your business, you won’t have one. Some business owners believe their product or service will speak for itself. Others just aren’t savvy about advertising and marketing. But if people don’t know what you deliver, you can’t succeed.  New business owners tend to be especially nervous about spending scarce dollars on advertising. But without marketing, little good can happen. Look at it as an investment, rather than an expense that less successful competitors think it is.

6)    The marketplace is a minefield. Every company has competitors, and if you don’t now – and you are successful – you soon will. “To grow and succeed, you have to continually focus on the market, react to it and fight for what you believe should be yours,” says McBean. “If you don’t, your competitor will win the war.” You need to be cionstantly on your game and follow up your marketing efforts by capturing and retaining each customer your efforts attract.

7)    You don’t have to know the business you are in – but you have to know business.  Sure, you need to know the inner workings of your particular industry. But even more importantly, you need to understand at least something about general business fundamentals such as accounting, finance, business law and personnel, and how these impact each other and the decisions you make. You have to know what’s going on in your market, but it’s just as important to know how to translate that information into more sales and net profits. 

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5 Ways Business Owners Scare Their Employees

scareWhether you know it or not, being a business owner also requires being a leader – especially if you have employees. If you don’t display good leadership skills, you won’t get the most from your employees, and your business will suffer.

Despite good intentions, many business owners and managers unknowingly strike fear into employees simply by what they say – or don’t say. And fearful employees are not productive employees. They react to fear with the primitive ‘fight, flight or freeze” instinct and begin to focus only on their own survival, says Christine Comaford, a leadership consultant and author of the new book “How Teams Become Brilliant Together” (Portfolio/Penguin 2013).

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Here are five ways that business owners inadvertently scare employees into a dysfunctional state:

1. You “help them out” by giving them solutions. When you constantly tell people what to do instead of encouraging them to figure things out on their own, you develop a business full or order-takers instead of innovators. By training them to always ask, you end up with a group of workers who are perpetually frozen in survival mode.

On the other hand, when you engage people in problem-solving themselves, you create a sense of safety, belonging and mattering.

2. Your meetings are heavy on sharing and point-proving, and light on promises and requests. Meetings that are rambling and unfocused send people into fear and confusion. But short, high-energy meetings that have a clear agenda keep everyone motivated. Ideally you should focus on only enough information sharing to solicit requests from people who need something, and promises from people who will fill that need.

If you tune up your communication, the result will be meetings that are efficient and effective, and that keep your employees happy as well as productive and accountable.

3. You give feedback to employees without first establishing rapport.  In short, you must be able to influence people, not just boss them around.  Here are three shortcut phrases that can help you do that:

  • “What if…” When you use this preface to an idea/suggestion, you remove ego and reduce emotion. You’re curious — not forcing a position, but kind of scratching your head and pondering.
  • “I need your help.” Specialists call this a “dom-sub swap” because when the dominant person (the boss) uses it, they are asking the subordinate person to rise up and swap roles. This is especially effective when you want a person to change their behavior or take on more responsibility.
  • “Would it be helpful if…” When a fearful employee is unable to move forward, offering some options will help them see a possible course of action or positive outcome.

4. You focus on problems, not outcomes.  Instead of asking ‘What’s wrong?’ and ‘Why is this happening? You should ask ‘What do we want?’ and ‘How will we create it?’”

Being outcome focused is more energizing and fills people with confidence. Avoid saying things like “Let me help you” or  “I’ll make it better for you.”  Instead, say “What outcome would you like?” and “What will having that do for you?”

5. You talk about change in the wrong way. Most business owners and managers want their businesses to change. That’s the only way to grow and get better. But as we know, most employees – and people in general – fear and resist change.

People tolerate change better if it’s framed the right way – more like “sameness with a difference.” Try presenting change as merely an improvement in what is already being done. The bad stuff is being removed, and the good stuff is being added. You might even avoid using the word “change” at all and instead use “growth” which is less daunting to most people.

“All business owners want to outperform, outsell, and out-innovate the competition,” says Comaford. “And most of us have teams that are quite capable of doing so. We just need to stop scaring the competence out of them.”

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6 Things that Growing Businesses Do Right

growthWhat sets growing businesses apart from their biz brothers and sisters whose revenues are flat or falling? Based on a recent study that compared small firms with rising revenues against their counterparts with flat or declining sales, here are the six practices that stood out:

1. Planning Ahead

Business owners who managed to grow in the face of economic weakness were adept at planning for what might go wrong, rather than simply reacting to trouble. When times were good, these well-prepared businesses squirreled away cash reserves and opened credit lines that helped them weather tough times without having to make cutbacks.  In contrast, owners with declining revenues found themselves madly rushing to slash expenses as difficulties mounted.

2. Borrowing Strategically

Growing businesses understand that borrowing can be a good thing (especially since interest is tax deductible) if the money is put to good business use.  And the use that has paid off best for growth firms is R&D. About 58% of high-growth small business owners report that R&D type investments yielded the most positive returns. On the other hand, borrowing to open new offices, build production facilities or add new capabilities was more likely to correlate with a DROP than an increase in sales. Likewise, borrowing to add staff was generally a money-losing endeavor.

3. Sharpening Management Skills

Professional development also leads to more income. Business owners who improved their skills at strategic planning and money management, for example, had a better chance of achieving revenue growth than those who didn’t.  But the most compelling results came from those who got better at hiring the right people. Team building skills, it turns out, are great for boosting a bottom line.

4. Getting Good Advice

Business owners have always relied on advice from friends and fellow entrepreneurs. That never changes.  But the best of them also make sure they plug into a savvy accountant or other financial advisors to provide the kind of professional fiscal advice that every business needs, no matter what size.  For example, 68% of businesses with rising revenues sought out financial advisors, while only 51% of those with declining revenues took that step.

5. Balancing Business and Life

Revenue-boosting business owners tend not to be all-consumed by their businesses.  They’ve learned to balance involvement with family, friends and their communities.  In short, they run their businesses – not the other way around.  Conversely, business owners whose revenues decline tended to be more fiercely independent and obsessed with their companies at the expense of other parts of their lives.

6. Sharing Vision

There’s also a strong correlation between success (in terms of revenue growth) and business owners who were strong leaders and adept at sharing their vision with employees, colleagues and others.  In addition, it was critical for business owners to demonstrate commitment to the business and inspire teams to perform at their highest level.

If you’re not among the ranks of revenue risers, take these six differentiators to heart as you plan your year ahead. By following in the footsteps of success, you’ll have a better chance of increasing revenues no matter what’s happening in the economy around you.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.  Follow @140Main

5 Ways to Make Service Part of Your Business DNA

Customer service expert Ron Kaufman has a radical notion that great service shouldn’t be as hard as it seems to be for so many businesses to deliver. “Service is everywhere,” says Kaufman, author of the new book Uplifting Service: The Proven Path to Delighting Customers, Colleagues and Everyone Else you Meet. “But there’s a disconnect between the volume of service we need and the quality of service we are giving and receiving. Businesses have turned a simple concept into a catastrophic cliché. They remain blind to the fact that true service comes not from demands and dashboards, but from a basic desire to take care of other people.”

Here are five keys to making exceptional customer service part of your business DNA:

1) Start by instilling a service orientation in your business.

Unfortunately, when most small businesses hire someone new, the part of new orientation that relates to customer service is often nonexistent. “This is your desk; this is your password; those are your colleagues; these are the tools we use. Welcome to the organization. Now get to work.”

“Service orientation goes far beyond induction,” says Kaufman. “Zappos is an example of one company that really gets this. Its four-week cross-department process is an example of new-hire orientation at its finest—deeply embedding and delivering on the company’s brand and core value, ‘Deliver WOW Through Service.’ Zappos understands that new team members should feel informed, inspired, and encouraged to contribute to the culture.”

2. Establish an engaging service vision.

A clear and engaging service vision will unify and energize everyone in your business to aim high for customer service. It doesn’t matter whether you call this building block your service vision, mission, core value, guiding principle, credo, motto, slogan, saying, or tagline. What matters is that your engaging service vision is actually engaging.

3. Communicate your service goals.

A company’s service communications can be as big and bold as signs in the front of the store proclaiming your commitment to customer satisfaction, or as simple as including employees’ hobbies or passions on their nametags. Service communications are used to educate and inform, to connect people, and to encourage collaboration, motivate, congratulate, and inspire.

“They’re essential because they can be used to promote your service vision, showcase your new hires, announce your latest contest, explain have you measure good service, and give voice to your customers’ compliments and complaints,” says Kaufman. Service communications keep your people up-to-date with what’s happening, what’s changing, what’s coming next, and most of all what’s needed now.

4. Offer service recognition and rewards.

Service recognition and rewards are vital building blocks of a service culture. They are a way of saying “thank you,” “job well done,” and “please do it again” all at the same time. Recognition is a human performance accelerator and one of the fastest ways to encourage repeat service behavior.

“While money may seem like the most obvious reward for employees, it isn’t always the most effective,” says Kaufman. “An auto dealership I know of learned this lesson the hard way. It paid its sales team a special bonus for achieving high levels of customer satisfaction. But when bonus payments were curtailed during a sales slump, customer satisfaction levels also fell.”

Genuine appreciation makes a more lasting impact on any employee. And there are tons of great ways to reward and recognize. You can do it in public, in private, in person, in writing, for individuals, or for teams. You can do it with a handwritten note, a standing ovation, tickets to a concert or ball game, an extra day off, dinner for the family or many other ways.

5. Create a common service language.

The whole domain of service suffers from weak clichés, poor distinctions, and inaccurate common sense. “Oh, you want service?” an employee asks. “Well, you’ll have to talk to our service department.” Or, “You want something else or something different? That’s not our policy.”

“We create meaning with language, and we can change our world by inventing or adopting new language. Your common service language should be meaningful and attractive—a shared vocabulary to focus the attention and the actions of your team. It should clarify meaning, promote purpose, and align everyone’s intentions and objectives,” says Kaufman.

Copyright © 2000-2012 BizBest® Media Corp.  All Rights Reserved.

4 Rules for Fostering Innovation in Your Business

Innovation is one of today’s most popular business buzzwords.  Most small and growing businesses – and especially startups – say they want to innovate. But most never get there because they are focused only on cost and efficiency, and not creativity, leaving little room for fresh ideas. In fact, many businesses today are actually anti-innovation without even knowing it, says Ed Hess, a business professor at University of Virginia’s Darden Graduate School of Business.

In today’s “do-more-with-less” environment, innovation can be too messy and inefficient to take root. Many business owners seek stability through structure and predictability rather than less-predictable innovation. But the mechanisms that help grow a business are much different from those that simply keep it from falling apart. In order to grow and innovate, you have to be willing to explore a little and put up with some uncertainty and ambiguity.

To instill a mindset of innovation at your business, you’ll need to adopt some different ways of thinking. Here are four “rules” for fostering innovation in your business:

1. Efficiency and scale don’t always rule the day: Typical business management practices in companies of all sizes favor efficiency and avoiding risks.  But being innovative requires taking some risks and trying lots of different things. And that, of course, means that some won’t work out. But those “failures” are like down payments on the things that do work and that will help your business grow.

2. Not everything needs to be certain: The fundamental nature of innovation is that nothing is certain.  Businesses that are best at innovating are dominated by ambiguity and change.  You just have to get used to it and create an environment that allows for experimentation, invention and exploration. It might be nice to talk about achieving near “perfect” performance, but growth experimentation often produces much the opposite. Variance – the enemy of efficient, cost-effective operations – is the norm when it comes to innovation.

If you want an innovative business, be careful about how strongly you insist on efficient, waste-free execution. You can easily end up killing any and all inventive ideas, as the path to innovation is not a straight line.

3. Innovation does NOT have to be revolutionary:  Sometimes, thinking smaller is the best way to foster innovation. All too often, entrepreneurs think that innovations – and just about any goals for that matter – must be big and audacious. They don’t. Get over it.  Setting – and achieving – small, proximate goals and innovations is a better way to keep the ball rolling.  In fact, most innovations are small, incremental things that are close to the core activities of your business – be they products, services, processes or all of the above.

Innovations can and should build on things that have already been done – they don’t have to be revolutionary. Says Hess, “The kind of ideas businesses should want to generate are all about creating new value for customers.”  We shouldn’t care if it’s already been tried, looks like something old in a new package or is borrowed from another industry. What’s most important is that it creates value for your customers that no one else has yet offered them.

Remember:  The best innovators learn how to combine existing things differently or transfer concepts from different industries or domains.

4. Innovation and effective execution can co-exist: Sure, innovation is often a messy process that is prone to failure. But don’t try to isolate it within certain places or people in your business. In other words, don’t feel like you need to segregate innovation from the rest of your business, where you have people who “execute” and others who “innovate.” They can go hand in hand, and the bridge that helps connect them is learning, according to Hess, who is co-author along with Jeanne Liedtka of The Physics of Business Growth (Stanford University Press, 2012). When you encourage employees – and yourself – to learn about new things and avoid “my way or the highway” type thinking, you will foster innovation in your business.

Finally, says Hess, understand that “growth experimentation” is a game of probabilities and the sooner you get customers actively engaged in your experimentation game, the more likely you will be to win.

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A Foolproof Framework for Hiring Perfect People

Here’s a motto every business should live buy:  Hasty hiring brings frequent firing.  Unfortunately, however, the hiring “process” for many firms still consists of little more than posting a job opening, sorting resumes and hiring the first person who makes a good impression and survives the gauntlet of interviews.

But the consequences of poor choices can be severe. If you keep an unproductive person on, you’re damaging your business.  But when you fire someone you face administrative costs, possible severance pay and maybe unemployment compensation. Then you’ll have to pay to attract and train a new candidate. Meanwhile, you pay others more to take up the slack.

Toughen Up Your Interviews

“It’s better to take your time and temporarily be short-staffed than to lower your standards,” says hiring expert Dave Anderson, who’s given over a thousand leadership presentations in 13 countries.  Anderson’s key advice? Become a better interviewer! And use the interview process in new ways to eliminate weak candidates and find the perfect fit.

For example, many interviewers throw softball questions at job candidates. You should toughen up that process and use it to eliminate or “knock out” candidates through smart, rigorous, values-shaped questioning.   This turns hiring around.  Instead of it being an inclusive process, it becomes an elimination event.   “The knockout interview begins before you ever meet a candidate,” says Anderson. “In fact, your goal is to avoid face time as much as possible. From the very first resume, start looking for reasons to cut individuals from consideration.”

It’s About Quality, Not Quantity

Stop believing you have to see large numbers of applicants to find the best one.  You don’t.  It’s exhausting and unproductive to interview lots of the wrong people. Make as many cuts as you can with an initial phone interview. Here are five tactics that will save you time and help you find perfect hires more quickly:

1.            Look for an ability to be faithful in the little things. When it comes to making great hiring choices, no detail is too small. How well a person performs on little things is indicative of how well they’ll perform on big ones.  Start evaluating this capability when the first résumés arrive. As you read them, look for reasons to put some in the “reject” pile, keeping in mind that you want to uphold your organization’s standards of excellence.

2.            Make sure the candidate has the basic ability to do the job.  In addition to making sure that candidates communicate clearly and respectfully, your task is to ensure they can fulfill the core, non-negotiable requirements of the position. For example, you may want to ask applicants if they’re available to work certain days or hours, or if they’re comfortable performing specific tasks.

3.            Let them do the talking:  It’s an interview, not a monologue.  Many business owners try to put job candidates at ease by doing most of the talking and spending much of the interview telling the candidate about the company. Your job as leader, however, is to assess an applicant’s character and competency. Don’t be intimidating or overbearing, but keep in mind that your goal is to evaluate the prospect’s accomplishments, because past performance is far more telling than past experience.

4.            Consider their journey, not just their current location:  Don’t judge applicants strictly by the career “level” they’ve reached.  Dig deeper to determine how they got to where they are. You may be surprised at what you find.  Some people are given a generous head start in life, while others have been forced to navigate many obstacles. These candidates may have faced the kinds of challenges that can forge greater strength of character and persistence.

5.            Share your core values before hiring. The objective of the knockout interview formula is to find a reason to say “no” to a job candidate. By sharing your core values with applicants, you may find that some knock themselves out for you. Describe your organization’s core values and behavioral expectations before extending an offer. Let applicants know that you have non-negotiable standards for integrity, teamwork, attitude and attention to detail. Then describe what these behaviors look like in practice.

This formula works because it forces candidates to show through their actions that they have initiative, really want the job, and can be an asset to your business.

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How to Create a Winning Business Culture

When  a once-growing business stumbles, the cause is sometimes an overlooked culprit: the company culture.   Many good businesses with solid ideas, a great market and talented people start to lose their grip on growth after failing to win victories that seemed within grasp.   Slowly, the “win or die trying” mentality gives way to deciding how best to fail.

This saps energy from the business as people stop believing they can be successful.  “There is no obvious moment when the danger of failure becomes clear,” says leadership expert John Hamm. “But there is a moment  when a business enters the risk zone—when challenges arise and there are no clear answers. It is at this fork in the road that business owners must intervene with specific messages and actions aimed at getting everyone back into the winner’s mindset.”

Here are seven ways to keep a culture of winning alive in your business:

1)            Set reasonable goals:  There’s a thin line between an invigorating challenge and a deflating expectation. Business owners – and especially hard-charging entrepreneurs – should realize that not everyone may share their level of maniacal commitment.  Sure, top performers are often inspired by stretch goals.  But goals that are clearly beyond a reasonable expectation of success are worse than easy goals—they can actually damage your company’s energy.

2)            Avoid the trap of “pseudo-wins.”  Everyone likes to reward small wins.  And that’s great.  But it becomes a problem when that’s all there ever is and everyone starts to major in minors. In other words, keep your perspective. It’s easy to lose sight of what’s really important, and where the wins are most needed. The danger in seeking minor wins all the time is that when everyone seeks those small satisfying moments that can be gained from simple tasks, nobody tackles the tougher jobs. 

3)            Banish lame excuses.  Every workplace has the equivalent of a “the-dog-ate-my-homework” excuse.  Don’t buy it.  Some tolerance is required, but there should be clear lines as to what’s acceptable and what isn’t.  In other words, define clearly what success looks like so there’s no confusing it with something that is really a failure. Huge amounts of energy are expended on complex excuses and playing the blame game.  Shortfalls are certain; and expected.  But what you want is an insightful explanation for the gap so the problem can be fixed.

4)            Don’t tolerate sloppiness.  The nice guy in all of us wants to avoid the perception of being a hardcore drill sergeant and will politely overlook a cut corner, incomplete report or other shoddy work.  But sloppiness often stems from laziness or simply not having enough pride in the finished product.  Successful businesses don’t allow sloppiness because they know it equals death.

5)            Discourage data fudging:  Achieving and measuring victories often requires interpreting data of one kind or another.  But data can be interpreted to fit whatever you want it to fit. This “editorialized data” is a big danger.  Business owners, as eternal optimists, have a tendency to signal  their dislike of bad news. When that happens, others will begin to shape and color the data to meet your expectations and needs. Feedback becomes corrupted and the likelihood of success begins to plummet.

6)            Measure what matters: The right metrics will help enormously.  Look for reality – not what you simply expect.  Measuring what matters is critical to successful execution. Once your plan is set and underway,  you must rely on feedback (metrics) to make course corrections along the way. 

7)            Make your commitment to winning absolute:  “A tolerance for excuses, corrupt data and a distorted view of what is really happening ‘out there’ is akin to boiling a frog one degree at a time,” says Hamm.  “The frog can’t tell how hot the water has become until it’s too late.”  You must avoid the rationalization that occurs when winning seems out of reach and keep your commitment to making it work.

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