What is small business management? If you try defining small business management, you’ll find yourself trying to cover all aspects of your business, and summarize your weekly activities and responsibilities using MBA terminology and business buzzwords.
In reality, small business management means doing whatever your business needs when it needs to be done. That could be landing a new round of capital or taking out the trash; both are necessary, and both fall on your shoulders when you own the business.
As a small business owner, It’s important to acknowledge that you are more than the CEO. If you think of yourself as CEO-only, you risk ignoring critical business issues or ordinary tasks that must get done.
The overwhelming, do what needs to be done, nature of running a small business might seem too big to capture in a few guiding principles. However, there are a few golden rules of small business management that will help you get your job done, no matter what the function.
Effective tips for small business success
Where do you start when identifying golden rules for small business management? First, break your business down into its many functions; and then, highlight guiding principles critical to successful operation of that function.
Bring in more money than you spend
If you have taken on debt to finance your business, don’t let this rule turn you off. Debt financing and other capital raising strategies count as bringing money in.
At all stages in your business’ lifecycle, you have expenses. It’s critical that you know how much money your business needs to spend in the current season. Whether you are bootstrapping your way to get your business off the ground, or you are scaling from small to medium sized business, you need a budget.
Your budget should include all expenses needed to accomplish the business goals for your current season. Once you identify your spending needs, you need to identify and start to procure the money to cover those expenses.
If you can cover your costs through revenue generation, great! But, that’s not always the case. You may need to take out a loan, or take on new investors. Raising money outside of revenue is not a bad thing, but you must make the decision consciously and fully understand the consequences.
If you take out a loan, you need to have a plan to pay it off, account for interest, and have a long term plan to cover expenses with revenue.
If you take on new investors, you must be comfortable with the control you give up, and ensure that you and your investors share a vision for how you will spend money and direct the business.
The long term success of your business comes down to basic arithmetic. The more you sell at negative operating income, the quicker you go out of business. Do the math, make a plan, and stay on top of your finances.
Sales and marketing
Solve problems instead of selling products
You may have the most intriguing new gizmo on the market. Your services might blow the competition away. But, if you aren’t solving a customer problem, the customers don’t need your products and services.
In his book, Management: Tasks, Responsibilities, Practices, Business Guru Peter Drucker wrote:
“What the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him.”
It’s tempting to make your products and services the center of your sales pitch, especially as an entrepreneur. You’ve put serious time and effort into your offering, and you are proud of it. You may even impress potential customers.
But, if you don’t solve a customer’s immediate problem, you won’t close the deal. Never lose sight of this principle when marketing and selling your products and services.
Know your limitations
Although it feels like you carry the entire business on your back, you can’t possibly do everything. Why? Because you don’t have the skills or the capacity to do everything. Pushing yourself beyond your comfort zone is both the struggle and a thrill of running a small business. However, at some point, diminishing returns set in.
Knowing when to hire is tricky. Identifying your own limitations will help you make the decision. Limitations generally fall into two categories: skillsets and capacity.
From a skillset perspective, you don’t have what it takes to cover all aspects of your business. You may be a visionary, with theoretical solutions to all client problems. But, you might not have the technical ability to turn those solutions into real products.
You may be a top notch engineer or developer, but have little ability to get a business off the ground or sell your product. Draft a job description that fulfills your current needs. If you don’t have the skills included in the job description, you have reached your skillset limitation.
From a capacity perspective, you will eventually run out of hours in the day to get everything done. Certain needs can go unmet without long term impact to the business. For example, it’s ok to miss trash pick up a few times, or forget to refill the printer with paper and ink.
However, if you fall behind and you start losing customers or turning business away, you have reached your capacity limitation.
Identify your limitations sooner rather than later to make sure you don’t overrun your ability to effectively manage your small business.
Hire the best
Your employees are your business. Don’t compromise when it comes to hiring because you need to fill open positions quickly. Do whatever it takes to make the right hire.
Aneel Bhursi, co-founder and CEO of Workday, personally interviewed the first 500 employees of his company.
Brian Chesky, founder and CEO of Airbnb, interviewed the first 200 employees.
Mitchell Harper, co-CEO of Bigcommerce, encourages business leaders:
“What I learned building Bigcommerce as co-CEO to almost 500 employees is that YOU should personally make the final yes/no decision on at least the first 100 people that join your company. It’s time intensive, takes a lot of brain cycles and can’t be delegated, but down the track when you’re hundreds or thousands of people, you’ll be glad you did. I am.
Your employees make your culture. They develop your products. They sell your products. They are the face of your business to most of your customers. You need those early hires to be the best you can possibly recruit. Take a personal interest in hiring, especially when you are small and establishing your business.
Engage with your employees
Once you make those great hires, make sure they stay engaged. Celebrate employee wins. Constructively redirect missteps, but don’t leave employees wondering what their role is in your business, or how they are performing from your perspective. Your employees should all know that they are important to your business and its success.
Reed Hastings, Netflix founder and CEO, meets consistently, one-on-one with the top 500 employees of his company. Hastings aspires to meet with even more. He points to Jack Welch, legendary GE CEO, who met consistently with 1,000 employees.
These meetings have an intentional purpose. The business leaders better understand what the employees are doing, what they are struggling with, and how they approach tackling business problems. Further, in meeting with the top executive, the employees feel valued and a sense of ownership in the business and its success.
If you want to empower your business, empower your employees.
Planning and Leadership
Gary Vanyerchuck, Angel Investor and CEO of VanyerMedia, uses a “clouds and dirt” metaphor to describe a small business owner’s planning and leadership responsibility. The “clouds” represent the strategic vision for the company. You are responsible for casting the vision, sharing that vision with your employees and shareholders, and crafting a plan that your employees can rally behind.
The “dirt” represents the hard work required to run a successful small business. It’s living out the do what needs to be done, when it needs to be done mentality. As a small business leader, you must excel in both the clouds and the dirt. You create the plans that keep your business on track, and pivot when necessary. At the same time, lead by example with hard work. Be the example that you want your employees to replicate.
As the leader, all of your time should be spent in one of these two areas. If you get stuck in the middle, somewhere between visionary leadership, and knocking out the to-do list, that’s when you’ll fail to lead. Don’t allow yourself to get pulled off track by office politics and non-essential operations. You are the small business leader. Lead through vision, and by example.
Small business management software, tools, and processes
The golden rules are a lot to manage. Luckily, you can systemize your pursuit of these rules through software, tools, and processes.
The modern business world has more financial tools available to it than at any other time in history. Whether its accounting, financial planning, invoicing, forecasting, or any other financial aspect of your business, financial software continues to evolve at break-neck speed.
New tools hit the market all the time. You need to evaluate which software is necessary to meet your business needs, but it must also help you execute your core small business management goals. When evaluating financial tools for your business, make sure it will help you understand whether or not you are bringing in more than you spend.
Features to look for include reporting, data analysis, real-time updates, invoicing, bank integration, and other features that allow you to understand the current financial state of your business, how you got here, and where your headed given projected growth and spend.
Sales and marketing
Small business software doesn’t stop with financial tools. Customer Relationship Management (CRM) software and Content Management System (CMS) software have supercharged sales and marketing teams in recent years.
What financial software can do with balance sheets and income statements, CRM software can do for customer analysis. CRM software allows you to dig into specific accounts and analyze granular details about the account and its contacts. As you add notes regarding customer feedback, and track their engagement with your company over time, CRM systems are great tools to uncover whether your sales team is solving customer problems or not.
CMS software and related marketing platforms allow you to easily manage your messaging. Whether it’s a new product, message, or campaign you want to test in the market, a solid CMS or marketing platform will allow you to easily reach a target group of people with a message tailored to their needs. Not all customers are alike, and their individual needs will vary depending on their circumstances. Leverage technology to specifically craft your message to the customer need.
Crunching employee-related data is a new practice, especially for small businesses. However, with many cloud-based Human Resource Information Systems (HRIS) and Talent Management Systems (TMS) hitting the market, businesses of all sizes are able to look at employee-related data and make informed decisions.
TMS software used for recruiting and hiring candidates that best suit your company’s needs is becoming more and more popular. It enables businesses to recruit for specific skillsets, levels of experience, and other factors that help narrow a broad pool of candidates for the perfect fit.
HRIS software allows businesses to look at employee-related data and its direct impact on the business. For example, Paul Falcone, author and HR executive, reported:
“Lowering turnover from 25 percent to 22 percent has a real benefit to the organization, and just like losing weight, once you see the needle start to move, it encourages everyone to get on board.”
When you use HRIS systems to view the impact of turnover on your business, it encourages you to focus on your core principles of engaging with your employees in a manner that encourages them to stay with the business and contribute to its success.
Planning and leadership
It would be nice if technology could make you a superhero leader, but it doesn’t work that way. Sure, you can manage your time with e-calendars, and improve productivity with collaboration tools; but, technology won’t make you a great leader.
Create a system that holds you accountable as a leader, and pushes you to continuously improve your ability. Surround yourself with peers that challenge you, learn from other successful leaders, and create an open environment where your employees can comfortably provide honest feedback. Build these connections and touch points into your ordinary work schedule so your ordinary business practices promote your own leadership development.
Small business management isn’t easily defined. Nevertheless, it’s essential to your small business success. Use a few golden rules in your management, and you’ll systematically lead your business to success.