The failure rate of small businesses in the United States is staggering. And most failed businesses can attribute their lack of success to the owner’s lack of understanding of basic business principles. Providing quality goods and services in a timely manner is just the first step in running a successful business. As the business owner, your job is to manage the success of the business. One way to do that is watching the company’s operating cycle. Your operating cycle is the time it takes from producing a product or service to collecting the payment from the customer. The longer your operating cycle, the better your chances of having cash flow problems. As the business owner, you must decrease the amount of time to collect your receivables to become and remain a healthy company. Take time and regularly review your accounts receivables. Don’t become another failed small business.
What is your reputation in your local business community? Are you considered to be a person of your word? To be trustworthy? Do you have a reputation for doing what you say you are going to do? Or is your reputation less than honorable? Nothing irritates me more than to be told one thing by a customer or a vendor and later learn that it was not true. Everyone makes mistakes, and I will give grace to any long-term business associate. But nobody wants to work with someone who lies. It is simply unacceptable. People like to do business with people they like. And people of integrity like to do business with other people of integrity. So in business and in life, always strive to do the right thing.
Many businesses struggle to build cash reserves. But maintaining a healthy cash balance is vital to the health of your business. There are many advantages to having extra cash. First, you can avoid a short-term cash crunch. With enough cash reserves, you do not have to fret over making the next payroll. Second, having extra cash will allow your company to seize opportunities that it might otherwise have to pass on. Opportunities like buying out a competitor or expanding into a new market. How do you build up your cash reserves? Just like you build your personal savings. Set aside a little every month. Make a habit of reviewing your net profits and cash balance monthly and setting aside a percentage into a separate account. Then, leave it alone. Don’t touch this cash until absolutely necessary. And keep saving until you have six monthly operating capital in cash.
Ever been guilty of saying too much? I think we all are guilty of saying too much at some time or another. Whether you are interviewing a potential employee or terminating a long-term employee, whether you are selling services to a new customer or introducing new services to an existing customer, whatever the given situation may be, people tend to say too much. Over-promising and over-committing are never habits of successful people. Success requires disciplined action, including restraint with your words. No successful person tells everything they know. And they certainly do not promise more than they are prepared to deliver. Most would rather under-promise and lose a business deal than to over-promise and lose respect. In EntreLeadership, Dave Ramsey says, “Even a fish can’t be caught if he keeps his mouth shut.” So when you find yourself talking too much, be wise. Be quiet and listen.
When you are confronted with the complexities of life, it is important to seek out the advice of experts. And the more successful you become, the more you will need to rely on these experts to make your most important decisions. Some of these experts may become team members for your organization, giving your company valuable skills beyond what you are able to provide. Others will remain outside of your organization, giving you valuable personal advice for navigating the many issues that come from living a successful life. Whether you need an estate plan, year-end tax planning, or a personal financial plan, it is important to build your personal team of experts to help you make the best decisions for your life. No one can be an expert in all fields. So, do not try to be one. Surround yourself with great people, and great things will occur.
Everyone suffers a little from know-it-all syndrome. While most of us relish in giving advice, few of us wish to receive advice. And when we do, how many of us actually heed the instruction of someone who has learned by experience? Look at the lives of the ultra-successful. Many are quite willing to share their experiences. And most show gratefulness to their mentors. They credit their success to the advice they received from those who preceded them. If the ultra-successful can acknowledge the instruction they received, then why are the rest of us so stubbornly determined to succeed by our own efforts? Most businesses fail within the first five years. If you are struggling with your business, seek out the advice of someone who has successfully run a business. And if you are fortunate enough to have a mentor, take time today to thank them for their influence.
As a business owner, one must decide how he will treat those around him. Will he treat his employees, his customers, and his competitors fairly? Will he be truthful? Will he be merciful? Certainly, there is a prevailing notion in our society today to succeed at all costs. That one should be willing to do anything to succeed. But I believe that you can succeed fairly. You can live a successful life and still treat others with respect and deal with them honestly. And when you are the victim of unfair business practices, you take the high road. Because winning at business is a small part of winning at life. How you win matters. This week, take a hard look at how you are treating the people around you. Be truthful. Show mercy. Live a life worth living.