Why does one small business owner flourish while another one fails? In all my years of being in business, reading all I can about business, and surrounding myself with successful entrepreneurs (large and small), I have come to believe there are 7 essential principles that all successful small business owners have in common.
- An entrepreneurial mindset
- Strict fiscal discipline
- A kitchen cabinet of advisors
- A defined brand
- A niche market
- Excellent customer service
- Cash position and a good banking relationship
1. An Entrepreneurial Mindset
To develop a mindset for success, you must realize that how you perceive your business and your life determines your reality. Business owners with an entrepreneurial mindset do not think like worker bees. They have several characteristics that cause them to stand out in the crowd. Entrepreneurs are not born. They are built through constant study and determination. Entrepreneurs are willing to fail to eventually win. They understand that not every idea is a good one. There will be times when you will be doing your best, but feel frustrated by a lack of progress in your business. Every entrepreneur goes through these difficult periods. I certainly have been there on more than one occasion. It is at times like this that you need to focus on the positive and keep your optimism working. The key is to avoid negative thinking.
2. Strict Fiscal Discipline
Successful businesspeople use budgets and realistic sales projections to run their businesses. They know by the 15th of the month how well their business did financially the month prior. They do not spend money on travel, events or trade shows that are not budgeted. They do not hire staff without have the money or contracts in place in advance. They also understand how to use a line of credit. They use it carefully for short-term cash needs, and not long-term funding needs such as marketing expenses.
3. A Kitchen Cabinet of Advisors
You will need to develop relationships with people who are already entrepreneurs or other businesspeople in a position to give great insight into what you need to be a business success. It is very helpful to also include a potential client in your back-channel conversations. Clients can provide valuable insight into budget cycles and current pain points, and most importantly introduce you to other potential customers. Keep the company of smart people. Sometimes a phone call to an advisor can save a lot of heartburn and money.
4. A Defined Brand
Your brand is the personality of your product, company or service, but what makes the brand great? You must protect your brand with the necessary trademarks, patents and/or copyrights for everything from your logo, colors and design of your packaging to the invention of a new product or process. Your brand enhances the performance, innovation, transparency of your company and it has the power to project a sense of social responsibility outside the company.
Successful entrepreneurs treat their brand as an investment, not a cost. A strong brand must be relevant to customers, contemporary and appealing. Brands are among the most important assets that a business can own, and strong brands can ensure business continuity in times 0f difficulty.
5. A Niche Market
Successful small businesses owners understand that only a limited number of people will buy their product or service. They only pursue marketing efforts toward the exact people they are targeting as customers. Having a narrowly defined group of customers is how they’ve built their business.
6. Excellent Customer Service
Successful entrepreneurs know excellent customer service will keep customers coming back. In today’s customer-oriented business environment, “people skills” are critical for small business success. How you handle your customers can directly affect your company’s performance. Strong businesses provide manuals and staff training on the skills needed to communicate professionalism, gain respect and enhance customer relationships. They also use customer relationship management (CRM) software to track the value of customers to the business and to manage customer contacts.
7. Cash Position and Good Banking Relationship
On a day-to-day basis, successful entrepreneurs understand what their cash position is in terms of accounts receivable and accounts payable. They do not just make deposits and withdrawals. They have a relationship with the manager and head teller at their bank. They also use two banks to make sure that their personal and business assets are not located in the same bank.
Do you have any other principles to add to my 7 small business success principles?