5 Principles of Successful Leadership in Small Business

When we think about leadership-especially in regard to building and growing a successful small business-it’s easy to envision the traditional top-down leadership that so often goes along with the term. We often think about leadership along the lines of being a major political leader or being the chief executive of a major Wall Street company. And while this certainly is a respectable vision of leadership, when it comes to small business, we’ve got to see beyond this traditional view.

Following are the top 5 principles of successful leadership that I’ve found make THE difference in whether your business flies or flops:

Principle #1:  Leadership Means Having People Skills.

Let’s face the facts-most small businesses don’t have scores of employees to lead. Instead,  leadership revolves around building successful business relationships with clients and friends of the business. Whether it’s negotiating the next big deal or selling the product or service represented by your business, your suppliers, customers, and all parties in between are who the small business owner must strive to lead.

Principle #2:  Leaders Must Be Adept At Solving Problems.

Being a natural leader makes it that much easier for a small business owner to be able to reach outside the box and come up with creative solutions to the problems and dilemmas faced by any business. It should come as no surprise that the list of qualities found in leaders corresponds very closely with the list of qualities found in problem solvers.

Principle #3: Leadership Requires Building Confidence.

Inspiring confidence in others when it comes to the capabilities of your small business is something that’s essential to success. Without this leadership trait, it would be quite difficult to handle the necessary business operations like securing financing and developing a strong sales plan. Remember, healthy confidence begins first with the leader, only radiating outward from there.

Principle #4:  Leaders Depend On Big Picture Vision.

Because the small business entrepreneur must successfully manage so many different facets of a business when leading it from inception through the growth stage, having “20/20” big picture vision is an essential leadership quality. Without this keen sense of vision to serve as a guiding light through the ups and downs-and ultimately to success-a business will gradually lose its course and drift off path.

Principle #5: Leading A Small Business Demands Boundless Energy.

It’s not always easy to keep plugging along no matter how overwhelmed you might be, but maintaining a constantly enthusiastic aura of energy is key to developing a business from the ground up. Most proven leaders will tell you that they only found major success after hitting rock bottom first. Boundless energy makes bouncing back from inevitable lows possible.

In small business, effective leadership goes well beyond the scope of leading employees alone-in reality, reaching goals means leading every single aspect of a business to success.

Small Business Coaching on Why Leads May Not Be Converting

For a lot of small business owners, leads may not be a problem. They may be receiving lots of leads. It’s the conversion of those leads that may be the problem. So in this article, let’s explore 4 reasons your leads may not be converting and what you can do about it.

1. Lead or Prospect Mismatch

Some people believe you have to get LOADS of random leads then some may shake out to be your ideal customer or target market. That’s a laborious process and it also produces false leads – people who were never really interested in what you have in the first place.

Leads may not be converting because they truly aren’t your ideal customer and they never were. If that’s the case, evaluate who those leads are, and check that they match the profile of your target market. If they’re not an ideal prospect, don’t waste time following up. Instead focus on generating more qualified leads that truly reflect your target market who is hungry for what you offer.

2. Follow-Up Fortunes

One of the things I discuss with clients is setting up a follow-up process for their business. There’s a fortune in the follow up, and honestly, there may be people out there just waiting to whip out their credit cards if only you’d pick up the phone and follow up with them.

When we’re pondering how to sell services, it’s important to create great follow-up systems that produce sales. A clear set of steps you take to follow up with someone who expressed interest in what you have to offer but hasn’t made a buying decision yet. The thing to remember is that customers buy not when we want them to buy; they buy when they are ready to buy. And this is why it’s important to have a follow-up system where you continue to provide value and you also remind them of how you can help.

My weekly Ezine is a good example of a follow-up system. It shows up every week with valuable information in response to subscriber questions, and it’s also a reminder of how I can help further if you’re interested in going deeper on any of the topics I discuss.

3. The Sting Rejection

Sometimes when we follow up, we essentially get a “No thanks, I’m not interested.” Ouch. But is it really an ouch? To me, sales is all about genuinely finding out the customer’s need is first, and listening very well to see if I truly have a solution to those problems/challenges. If I do have a solution that can help, then I’ll share what options exist. And I do so by giving the prospect all the information they need to make a decision.

Sometimes we are not converting leads because we’re very afraid to follow up. Afraid of rejection. Afraid of bothering or pestering people. I’d invite you to embrace that the sale is not about us (as small business owners). It’s about the prospect or client. Avoid getting emotionally attached to the outcome of following up.

If you know you can help someone eliminate a challenge or frustration by what you offer, then why not follow up to let them know. Sometimes that requires that you shift your thinking from someone trying to “get a sale” to becoming a provider of solutions. And if that follow-up leads into having a sales conversation where you’re sharing specifics about your offerings, sure, they may say “no.” Their decision is simply a choice and not a rejection of you. All that said, however, you do need an effective sales conversion process… which brings me to my next point.

4. Sales Conversion Process

Prospects convert to paying clients more easily when you have a clear sales process through which you can take them. If you don’t have a clear, step-by-step method to take a prospect from interest to purchase, this may be why you’re not converting them. Sometimes we get stuck because we’re staring the list of prospects but we really don’t know what we would say if we did follow up with them. So we procrastinate and we don’t take action.

Don’t Operate Your Small Business Like It Is Small!

With 46% of small businesses failing within the first 5 years, they simply cannot afford to operate “small” any longer. Big businesses, aka Fortune 500 companies, understand the value of setting up a business with predictable, manageable systems and having the necessary framework in place to ensure profitable and productive results.

The 7 Big Business Tools:

There are 7 tools that all big businesses use within their organizations to ensure higher profits, higher quality, and increased customer satisfaction. Applying these tools to your small business will increase your chances of staying in business longer and give you more control of its operations, profitability, and get you out of a “small” business mentality.

1. Organizational Charts

Organizational charts outline the functions that are required for a business to run on a day-to-day basis, as well as the person responsible for that function. This tool determines the “Who” of the business. Organizational charts also drive accountability for each area of the business and outline clear responsibilities.

Big businesses have figured out that while it is important to have people lead each of the functions, it is even more important to make sure the skill level and competencies of that person match the role. As a majority of small businesses typically have a small staff, roles are often filled by whoever is available. This mistake could lead to inefficiency and prevent the business from operating at its peak level. Completing an organizational chart will help identify the gaps that exist in the skill set of current employees and should be developed even when there is only one person in the business. This activity will allow for future growth as the business is expanded to include more and more employees.

Remember: The more times one name appears in an organizational chart, the less productive and effective it will be!

2. Operations Manuals/ Procedures

Operations manuals and procedures document the tasks that are to be done within the business. Use this tool to capture the “What” of your business. This will serve as a step-by-step guide on how to complete each task and give clear expectations of how your business is to run. This documentation can also serve as a training aid for new employees, allowing them to ramp up faster, and reduce the amount of time you have to spend training. This tool will reduce the variability in output and quality that can occur when employees are allowed to do it their own way, in effect making it their business.

If there are no employees within your business, use procedures to help you become more efficient by performing tasks the same way, every time. You will also reduce wasted time remembering how you completed a task previously.

Be sure to review your operations manuals and procedures periodically for relevancy and areas of improvement. Have you found another way of doing things more efficiently? Does the task take a significant amount of time? Look for steps that may be duplicated, can be removed, or take a lot of time to complete. Conducting this review will lead to continuous improvement within your business.

3. Business Systems

Given the complexity in most big businesses, they always have systems in place to make sure their operations are set up to flow smoothly and reduce the chaos that can occur when there are so many functions and employees. Small businesses can take advantage of the benefits of having a systemized business as well. Systems are no more than how the tasks and functions interrelate to deliver a completed product or service. Having a system in place allows you to produce the same quality results every time, which in turn leads to increased customer satisfaction. You can describe this as the “How” of your business.

For businesses with only one person (the owner), set up business systems that automate some of the key tasks. This will give you more freedom to work your on business and strategize, rather than in your business doing a lot of the mundane tasks. You will find that you will have more time to grow your business when most tasks are systemized. Business systems produce a highly organized business and can also be used as an effective management tool for owners since feedback can be gained about your business performance when things don’t work as expected.

4. Process and System Audits

Auditing your processes and systems asks the question “Are we doing what we say we are going to do?”. When you have taken the time to document the key tasks in your business, it makes sense to periodically review whether or not the procedures are being followed. If they are not, then find out why. Auditing allows you to qualitatively measure how well your business is performing.

Take it one step further, and check for the effectiveness of the system, not only the compliance to it. An easy way to do this is to look at your customer satisfaction measures, the number of errors or defects you are getting, and how easy it is to follow your process. Often times, while all of the procedures are being followed, they may not be producing the results that are intended, so auditing can help you uncover these issues.

Use auditing within your organization to drive accountability, and make following the process a habit. Not only will you improve the efficiency of your business system, but you will continue to make your business better, meet your customer expectations, and consistently meet business goals.

5. Key Metrics and Reporting

Metrics are the key data that you need to make business decisions. As the old adage implies, “you cannot manage what does not get measured”. Your key metrics are a snapshot of how well you business is performing. Use these measures to quantitatively assess your output.

An easy way to determine what your key metrics should be is to ask: What do my customers want? What is important to them? The answers to these questions will be become the standards by which you measure your business. Other metrics can include weekly sales goals, revenue goals, or the number of calls made to prospective clients.

After key metrics are determined, institute a regular reporting of the results and look for trends upward or downward that need correction. Use dashboards that can be set up easily in an Excel spreadsheet program for quick access to the data and results. Also, be sure to tie the metrics to the functions in your business to increase accountability for the results.

In addition, consider using your metrics and reports as a communication tool to clients and prospective clients. Show how you differ from your competition, and what you can do for them relating to customer service levels, response time, or any other measure most important to that audience.

6. Six Sigma Process Improvement

A highly utilized efficiency tool used in Fortune 500 companies, Six Sigma is a data-driven methodology for reducing the number of defects within a business system. It will demonstrate quantitatively how well a process is performing and focus on variation (what the customer sees and feels) reduction.

Big businesses use Six Sigma to reduce lead time, excess labor costs, and processing times, saving them millions of dollars annually. Small businesses can also realize the benefits of applying this process improvement tool in the same way. Use of the tool increases customer and client loyalty as they know what they are going to get every time.

Find out more about Six Sigma and its benefits here at the iSixSigma website: http://www.isixsigma.com/.

7. Problem Solving Tools

There are different ways to address the issues that inevitably occur in businesses. Have a toolbox of problem-solving methodologies to solve the different problems that occur. This will allow for rational and data-driven decision-making, and help you get to the root cause of the issue. It is widely understood that if you solve the problem well, and eliminate the root cause of a problem, the problem will not re-occur.

Some commonly used problem-solving tools include:

  • Brainstorming
  • Root Cause Analysis
  • 5 Whys
  • Cause and Effect Analysis
  • Flow Charting
  • SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis

All businesses have problems, and that is actually a good thing! Look at problems as opportunities to improve, and as simply the difference between the current state and your business goals. Become familiar with the various tools available, and train your team to apply the tools as well. This will increase your confidence in the decisions being made in the business, and ultimately free a business owner from having to be involved in every business decision being made.

These 7 tools all work together to ensure a highly organized, productive business. Use these “Big Business” tools to increase productivity, profitability, and your chances for small business success. No longer think that your small business is not quite ready for this framework, and begin to operate your “small” business like it is “big”.

Small Business Financing Problems and How to Solve Them

Many, if not most, small businesses will experience financing problems at some point during their life. How well management deals with these problems will go a long way to determining the ultimate success or failure of the business. There’s an old saying in business; “Cash is king”, and so it is. There are many instances of businesses being profitable on paper only to be unable to sustain operations due to poor cash flow management.

The financing problems created by improper cash flow management are ranked high on the list of problems faced by business owners. In fact, the 2007 Small Business Survival Index ranks financing problems up on the list of small business problems along with taxes (which can create financial problems of their own), government regulation compliance, legal threats, and finding quality employees.

If your small business is experiencing financing problems, what can you do to solve them? You have several options. You can bring in more revenue, reduce expenses, or become more efficient at managing your cash flow. In most cases you would better served by doing all three. Let’s look at these solutions and how to achieve them.

Increasing revenue is certainly a worthy goal of every business, but may not in itself lead to a solution for your small business’s financing problems. This is because in many cases additional funds are necessary to support the larger operations that create the additional revenue. For example, if you have a contracting business, you’ll need more staffing to take on additional work, which will lead to a short term cash flow problem until collections catch up with your increased labor costs.

This can be seen for manufacturing businesses as well. As your business grows and production levels rise, your business will incur additional plant, equipment and labor costs to support the larger number of orders you’re receiving. Until your receivables catch up with your increased costs you will have financing problems.

This means that increasing revenue isn’t always a solution to cash flow problems,and can actually exacerbate them. Increasing revenue to solve small business financial problems is desirable in the long term, but will only help in the short term if the revenue increase can be obtained without substantially increasing costs or if your business operates on a chiefly cash basis. If you extend credit to your customers, the additional costs required to grow your revenue can easily lead you into a cash position that gets worse before it gets better.

What about reducing costs as a solution to improving financing problems? For most businesses, reducing costs, if it can be achieved without reducing revenue, or reducing costs associated with unprofitable revenue is of utmost importance. Not only do costs directly impact the bottom line, they can reduce the operating efficiency of the business, large or small. Traditionally the largest business expense is labor. While this rule isn’t always true, the majority of business owners can attest to the fact that labor costs are what keep them awake at night. The problem is reducing labor costs while protecting revenue.

The other cost that is especially troubling for many small business owners is taxes. In fact the American Institute of Certified Public Accountants (AICPA), who would be a position to know about such matters, ranked taxation issues as one of the three leading causes of small business bankruptcies. Reducing the tax burden by any legal means is vital to the long term success of your small business. This alone can reduce your financial problems to the point where cash flow problems disappear altogether.

Many small business use some form of financing to finance growth or smooth out the bumps in their cash flow picture. Weather the cash flow problems are caused by expanding operations, inefficiencies, or seasonal business cycles financing is another valuable tool available to the business owner to solve their cash flow issues. Financing solutions for small businesses are available in many forms, including lines of credit, loans, and additional investment provided through either equity or debt financing.

No matter the other problems faced by your small business, it’s clear that financing problems will always rank high on the list of problems faced by small business owners. It’s how well you deal with these problems that will determine the success you experience in your small business.