Top 10 Secrets for Small Business Success
Farm Management Update, October 1996
David M. Kohl, Dixie W. Reaves, Alex White, and Sarah Runkle
Small business is a thriving industry in Virginia. Of the 122,021 full-time business firms in the state, 98 percent of them are small businesses. Additionally, those businesses with less than 20 employees reported an 8.3 percent employment growth from 1990 to 1994. During 1992, annual payroll for Virginia small businesses rose 6.6 percent. To continue these positive trends in the state's small business industry, we asked several Virginia small business owners to share their "secrets to success." Over 50 owners across the state were interviewed by the students in Dr. David M. Kohl's Small Business and Entrepreneurship class at Virginia Tech. Three local owners were interviewed during the class's second annual small business forum. Their "top 10 secrets to small business success" are outlined below.
Enjoy Your Business
"Relent on your ego -- never forget the people who helped you reach your goal"
Owning/operating a small business involves long hours and numerous responsibilities. To avoid becoming burned out by a busy schedule and overburdened by the endless responsibilities, enjoying the business is essential. Without enjoyment, an entrepreneur's pride in his/her business diminishes. Sadly, the business itself soon follows. To avoid losing touch with the small business, three tips from the small business forum are:
"Focus on things that are important rather than what's urgent"
Time management is organization, "the ability to structure your life and keep tasks and information in order" (The Young Entrepreneur's Guide to Starting and Running a Small Business by Steve Mariotti). The golden rule for full-time small business owners is the 3000/500 rule: no more than 3,000 and 500 hours per year should be spent working and taking part in community and other activities, respectively. Typically, if these hours are exceeded, both family life and health will suffer. The similar rule holds true for the part-time business owners (those who have a full-time job or are starting a new business) if they exceed the 1,000/750 rule: working more than 1,000 hours per year if under age 40, and 750 hours per year if over age 40. Timely planning is the key to balancing job tasks with community and extra-curricular activities. According to several Virginia small business owners, here are the top three planning strategies:
Give Back to Community
"It just feels good"
Contributing to your local community stimulates good public relations. In turn, good public relations stimulate a loyal customer base and a long-lasting relationship with the local community. The forum entrepreneurs have all contributed to their communities in positive ways. The following is what worked for them:
"Have fun on the way to the goal"
In order for a small business to be successful, the management must have goals with the following characteristics:
Setting goals that meet these criteria is a helpful means of prioritization: it helps to distinguish the importance of the $10,000 goal versus the $10 goal. Some of the "$10,000 goals" from the forum were:
"Goodwill--The Kiss of Death"
In the small business world, money is a precious commodity. When investing in their small businesses, owners tend to focus their attention on the initial investment--rarely do they take into account the unexpected expenses that will occur over the next 12 to 48 months. To prevent headaches over unforeseen expenses, the "ripple effect" strategy is recommended. The ripple effect allows for unexpected expenses by simply overestimating time and capital needs by 25 percent. Not only does this method save the owner from worrying about unanticipated money needs, it saves valuable time that could be used for other tasks and activities. Some advice from the forum entrepreneurs on key money and time matters is:
Growth is the number one cause of failure in the small business world. However, if managed appropriately, growth can be positive for a small business. The key to positive growth is transitional management. A small business owner must be able to teach and share his/her wisdom and experiences with others or risk destroying the business. By teaching and sharing, the owner/manager is able to focus attention on the "big picture" and allow others to worry about the details. Another key is adapting to the new situation (being a manager as opposed to being a technician). initially, adaptation will be difficult. Entrepreneurs "have trouble making room for the creative ideas and strategies that others envision" (Tom Chappell-Association Management). They frequently spend time in production and the day-to-day activities. To manage growth of a business, the entrepreneurs suggested:
Sell Service, Give Away Product
"Neighbors sell neighbors"
In today's society, it is the entrepreneur's job to "sell their service and give away their product." This philosophy can be accomplished with honesty and by "going the extra mile." Honesty is good customer service. It is the commitment to tell the truth about the products sold and services available and to deal fairly with the public (Mariotti). Being up front about the products' drawbacks and benefits is good business. Another key to good business is "going the extra mile" making a genuine effort to meet customer needs. Meeting customers' needs starts with understanding the cultures and groups of the local community. If their values, wants, and beliefs are understood, it is possible to better satisfy their needs. Some tips to remember when investing in customer service are:
Beware of Killer Toys and Side Show Ventures
"Feed the ego"
As mentioned before, growth is the number one cause of failure for a small business. Growth can cause failure in several ways. The most obvious being over expansion. However, during periods of rapid growth and increasing profits, "killer toys" (for instance, owning a race car or race horse) and "side show ventures" (such as an expensive hobby or another business) become very appealing. Nothing is wrong with having a little fun and enjoying the fruits of the labor. However, if the fun gets out of hand, disaster for the small business is near. Attention that should be focused on the continuing success of the business is now misdirected to spending money on "killer toys" and "side show ventures." The money and time spent frivously outside the business on these ventures drains the small business of funds and managerial focus and control. If these drains are not stopped, they will eventually lead to the demise of the small business. A majority of the forum entrepreneurs passed on an important message:
Don't let a short-run windfall in profit or cash flow influence and distract your way of thinking.
Praise in Public, Correct in Private
"Attract and keep good employees"
Human resource management is another major challenge for the small business. First, most small business people have never worked under another's supervision. Secondly, the business firms are small, and, as a result, a professional personnel manager is not employed. To remedy this, the forum entrepreneurs recommend the following:
"People just need to talk to each other"
Each member of the small business forum suggested that networking with other owners and having a "professional team" are essential to the continuing success of a business. Having and utilizing fellow business people as contacts helps a manager to stay abreast of industry happenings and changes. A professional team composed of the banker, lawyer, insurance agent, and accountant is crucial to the continued profitability of the business. Some advice from fellow entrepreneurs on viable networking is as follows:
These were some of the highlights from the small business forum and interviews. These suggestions and ideas are general rules of thumb that have stood the test of the real world. This is also an effective way that the classroom can report back to both extension and industry.
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