A longtime friend and business owner, Frank DeVita, was a featured speaker at a recent brown-bag lunch for business owners, the Small Business Owners' Forum. Frank is President of DeVita & Associates, a prominent Mechanical, Electrical and Structural Engineering firm he founded in 1984 in Greenville, SC.
Frank was sharing his views on the essential ingredients of starting and growing a business. He defined six principles that were so compelling and universal I asked him for a guest article on his 6 Principles of Business Success. Here’s what he had to say:
"The hard part is you have to do all of them -- you don’t get to pick only one or two, and here they are:My thanks to Frank for sharing this article with us. These are indeed six principles of successful business ownership, and most successful entrepreneurs with whom I'm acquainted are paying attention to all six all the time.
- "Passion – Passion is essential. As hard as you will have to work to make your business successful, it will be very difficult to sustain the energy to press on if you are not passionate about it. Passion for a business can sometimes be described as, "I'd probably be doing this for free, but if I didn't charge for it, no one would appreciate it."
Running your own business can be tough. On some days, passion may be the only thing that keeps you coming back. I also expect passion from my employees. In fact, one of my standard interview questions is, "What are you passionate about?” It's easy to get tired of a business that you're in for the wrong reasons.
- "Cash –When you run out of cash you go out of business. You cannot start or grow a business without adequate cash. This is true regardless of the size of your business. In a crunch, cash can be generated or conserved in various ways, such as:
- Reduced or deferred salaries
- Negotiating with your vendors to finance or extend favorable payment terms
- Negotiate favorable payment terms from your customers, including retainers or prepayments
- Securing a line of credit
- Peer lending – borrowing from other businesses or a large, cash-rich customer
- Angel investors
- Private equity investors
When these cash generating or conservation methods are combined they can be very effective, especially if you watch your expenses closely. Remember to consider the cost of debt when forecasting your cash flow.
- "Not just one thing – Business owners must pay attention to a lot of different things. You have to sell, acquire new customers, execute work, bill and collect, retain and renew customers, develop systems that support core business processes, hire, train, and retain people. All this must be done while dealing with banks, taxes, regulations, and customer and employee expectations.
Here's the business owner's conundrum. To be successful, you have to be able to do most everything – some things much better than others. However, to be successful you also have to focus your own time on your best and highest use and delegate the rest. In the heat of battle, you will have to pick up a weapon and fight along with the troops, but there are only so many hours in a day, so pick your battles carefully.
- "Hire the best – Pick only people who you expect to be A-players. This does not mean hire a Ph.D. for an office runner, but if you need an office runner hire the best one you can find. You have to have A-players, despite the fact that you'll occasionally slip up and hire some "B's" or "C's". Keep the people that you know are A-players, along with a few "B's". Continue to upgrade or replace "C's", and jettison "D's" and "F's" immediately. The secret to this is recognizing what each group wants and needs:
- A's – Stay out of their way, and keep others out of their way. These people will do well in spite of you. Never lose an A player!
- B's – Train them, coach them and develop them to turn them into A’s. There may be an A in there somewhere, but you need a bench of solid "B's".
- C's – Same as "B's", but don't let their higher needs seduce you into giving them more than their fair share of attention. If they do not become B’s after some period of time, replace them.
- D's & F's – As soon as you identify a "D" or "F", take action. They need a job that's a better fit with the skills they have. See: "When Do You Decide to Do Something About a Problem Employee?" Many business owners and inexperienced managers pour too much time into these "life-saving merit badge" folks to the neglect of those who could actually benefit from their help, and it’s no fair to either the rest of the organization or to the poor performer.
No one wants to do a bad job or be stuck in a job where they don’t fit. Get rid of your D’s and F’s, once identified.
Finally, invest in your people – spend the time and money to continually improve the skills of all the people in your organization, including yourself. Your people are by far your greatest asset!
- "Delegate and Predict – The business is looking to you for vision and forward radar. They all know what's happened. They want you to predict what's going to happen. Delegating the day-to-day gives you time for the planning, vision and charting the course to the future. This is working "ON" the business, rather than "IN" the business.
But as leaders our intuition had better be pretty good on some “nuts-and-bolts” things as well. For example, are those promised sales really going to get booked? Are your booked projects or sales really going to happen on the promised schedule, or will your customers want them sooner – or later? What is the quality of your receivables – should you borrow against them or mark them doubtful?
None of us has a crystal ball, but if you guess wrong too often it could have serious consequences for your business.
- "Know your numbers – Every business has critical numbers. Not just the easy stuff like did you make a profit, but numbers that are the key drivers for your business. Some call these Key Performance Indicators (KPIs). What are the critical numbers for your business? Perhaps sales per employee; sales per square foot of retail space; gross profit per employee; utilization rate, profit as a percentage of net worth; etc. What is your working capital trend?
It’s imperative to understand the numbers on your Financial Statements – the Balance Sheets as well as the Income Statements, Accrual as well as Cash.
It is important to study your numbers and know what they mean. Ask a lot of questions. The 2009 recession has again taught us that business owners who don't have good financial information or don't completely understand it are in great peril. Many failed in 2009 and some are still in danger of failing. If finance is not one of your core competencies, take the time to learn, and if necessary engage a part-time CFO who can help you analyze your past and forecast your future."
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Terry WeaverCEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
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