‘Designing Strategies’ newsletter
March – April, 2017 Volume 14 – Issue 76
There are eight important management factors identified by Neil C. Churchill and Virginia L. Lewis in the Harvard Business Review. They apply equally to any small business start up. Four of the factors apply to the business owner. The other four apply to the small business itself. Their research noted factors that affect both the small business owner and the business entity itself. Those factors are as follows:
Important Management Factors for the Business Owner
Personal and Business Goals
Without specific, clear cut goals, a small business owner is aligned with failure. With nothing specific to aim for, strategies and tactics can be pointed in too many directions. With no set goals, there is no target to aim for. Setting strategy is followed close behind by allocating resources to achieve goals. Operational budgets are set to assign appropriate staffing, time and funding to achieve tactics. With tactics going in all different directions, the resources are being wasted. Strong business owners/leaders need to work hard to assure that their planning and direction don’t go awry.
Operational Capabilities in Various Important Business Activities
There are a number of operational functions that go with every business. Some align with administration and operations. Others align with finance, and yet others to your products and services. For instance, activities related to your products and services might be: manufacturing, marketing, distribution and sales. These all relate to creating revenue for the company.
Administrative capabilities would include factors like planning, creation of budgets, human resources and customer service. Financial are pretty simple: regulating cash flow, bookkeeping, investing, accounts payable and accounts receivable. Needless to say, it is critical for leaders/owners to assign these tasks to the best possible managers.
Managerial Skills and Willingness to Delegate
Leaders must know how to manage their staff and delegate work. It is impossible for an entrepreneur to do everything alone. The first few hires must be qualified people with the ability to take on a sector of the business and build it. With these skills and willingness to delegate, the owner will have time to do necessary work ‘on’ the business.
Entrepreneurs often find it difficult to give up any control over the various important factors of their business. Without loosening the reins, their company will not develop and grow. It will stagnate at some point until the owner realizes that delegation is imperative to move the company forward.
Strategic Ability to Look Beyond the Present
Successful business entities require that leaders have the ability to look into the future. If a small business operates totally in ‘today’, chances for failure increase. Understanding what may be coming at your business at some point down the road is extremely important. Allowing your firm to be blind-sided by unexpected changes can be the death knell you were not expecting. The same goes for unexpected outside influences. Being flexible and well prepared are necessities for a small business to grow and succeed.
Important Management Factors for the Business Entity
It is no secret that large numbers of start-ups fail within five years or less. One of the key reasons for this is a lack of sufficient capital. Companies either need to have sufficient cash on hand or cash flow. And, they need to have the ability to borrow funds if cash gets low or slow coming in.
As mentioned earlier, it is important that owner/entrepreneurs hire high quality people for management positions in the early phases of growth. If you find and can get Rock Stars for these positions, grab them! These managers need to keep their direct reports motivated and on track. It is very important to hire enough good employees to complete the work required by all of the sectors covered by these management factors. And, it is equally important to hire in depth as well. A small business needs to assure training for future leaders happens on the job for potential new positions that will develop.
Sophistication of Systems
For a small business to grow and succeed, it is necessary to put systems and procedures in place to standardize every function of the business sectors. Employees will come and go. With standardized systems in place, replacement staff will be able to pick up the job faster and do it exactly the way it was done.
Build relationships with all company stake holders: customers, suppliers, manufacturers and distributors to name a few. Even outsourced relationships with other stake holders like technology and equipment providers, or payroll providers must be taken seriously. Much of your company’s reputation is based upon these important relationships. For this reason, all of these relationships are critical to your company’s success and must be strong to assure that everyone in the game is well treated.
You might ask: ‘Which of these important small business factors can we ignore?’ None of them! Every one of these factors is important. Every single one of them represents an equally important piece of your company and it’s chances for success. Without giving each one the same level of attention, your firm reduces it’s opportunity to succeed.
Understanding and managing these factors is important to the smooth day-to-day operation of your business. All play a key role in keeping cash flowing freely into and out of your firm. Understanding them and the places they hold in your overall plan for business success is imperative for every owner and leader. If your personal and business goal is to start and operate a successful small business, wrap your mind around these eight important business factors and be sure they are working.