Randy Nelson (pictured) has started and sold two successful businesses and is currently the CEO of Gold Dolphins, LLC, which provides coaching for entrepreneurial leaders and CEOs. But his first job out of college was on a nuclear submarine in the U.S. Navy. Before the Navy let him drive the submarine, he had to go through a long training. He feels entrepreneurs should do the same, becoming what he calls “qualified entrepreneurs.”
“The statistics are sobering,” Nelson says. “Fifty percent of small businesses fail within the first five years; 70 percent fail within the first 10.”
To help entrepreneurs make it beyond the startup phase to long-term business success, Nelson wrote The Second Decision – The Qualified Entrepreneur. He shared five of his tips to help small businesses live long and prosper.
1. Identify Your Business’ Operations Leader
“In every organization, you need the visionary,” says Nelson. If you’re an entrepreneur, that visionary is probably you. Successful businesses also need someone to take charge of creating systems and accountability. Nelson has seen a lot of entrepreneurs do both jobs, but that can be detrimental if they aren’t suited to day-to-day operations. “The decision to hire a number two who is the operations leader is a critical factor for that company to grow.”
2. Don’t Equate Profit with Cash
“We are all very optimistic people,” Nelson says of entrepreneurs. “We believe everything will work out well.” Sometimes this can lead entrepreneurs to make purchasing or hiring decisions that put too big a strain on business finances. They need to remember that while fast growth is exciting, cash may lag behind sales. “The biggest reason companies fail,” he notes, “is because of lack of cash.” Nelson advises small business owners have a cash flow projection six months into the future. Otherwise, “if you continue to expand too fast,” he says, “you could go out of business while being a highly profitable company [on paper].”
3. Remember You Always Have More to Learn
Nelson’s first business grew an average of 50 percent per year for each of its first 10 years. “I really thought I knew what I was doing because we were growing so much,” he says. But when he entered an advanced education program for entrepreneurs, he was amazed at how much he had to learn. “It was my biggest a-ha,” he says. “It became obvious I had a significant learning to do to be smart enough to operate the business for the long term.” He joined Entrepreneurs Organization and Vistage so he could continue to build his entrepreneurial skills. “It’s not a strength to think you know everything. It’s actually a weakness that can hurt you in the end,” he says. He recommends reaching out to peers for support. “I surround myself with people just like me, who are growing a business.”
4. Choose the Right Role for Yourself
Once your business is humming along, it’s time to decide which role suits you best: leader, role player, or creator. Nelson says the leader is the person who wants to be the CEO and run the company in the future. The role player is comfortable in a specific role, such as research or sales. Founders who are role players should find someone else to lead the business. “It’s okay not to be the leader of your own company,” he says. As for the creator, Nelson says, “It’s in their DNA to start companies,” and once things are up and running, they want to move on. “All of them are good choices,” he says. Your small business has the best chance to grow and thrive if you choose the role that fits you best.
5. Stay Focused on the Business at Hand
“Growing a business is exciting; maybe operating a business on a day-to-day basis is not,” Nelson says. “When [entrepreneurs] get bored, we go start another company.” Staying focused for the long haul requires a different type of energy than the heady startup phase. “Leadership is as important if not more important than entrepreneurship,” he notes. Nelson advises small business owners to make connections with their peers to help them stay engaged and excited about running their companies. “It’s not about the number of companies you can start,” he says. “It’s about the number of great companies you can build.”