Multiple times each year, someone who has been in a corporate position asks to meet with me. They’re interested in starting or buying a small business. Usually during these meetings they raise the question about what is required for a person to be a successful business owner.
Here is a list, by no means comprehensive, that indicates some of the attributes and behaviors that are required for someone to own and run a successful business.
- The business owner must have a strong desire to own a business and to work as hard as needed to be successful. Successful business owners are passionate about business, especially the business they own and the industry they are in. They know that, as a small business owner, they work harder because they are their own boss. They expect, going into ownership, that they will make personal sacrifices to be successful, especially in the short term. They, and their family, are aware of this, and both are willing to make the changes required for success at the beginning of their journey as a business owner.
- As an aside, one of the main reasons that second and third generations fail is that the next generation owners do not share the passion and commitment to the business that is required to lead it effectively. Whether it is the third or fourth generation of a large brewery or of a local auto repair store, when owners begin to adopt an entitled mentality, and are more passionate about their hobbies and other interests than they are about their business, then that business is on the path to diminished success.
- Successful businesses, particularly start-ups, must have a unique idea or a better or less expensive way of delivering an existing product or service. Uniqueness comes in many forms. The simplest form is the creation of a new product. Apple is an example of a company that develops and markets unique products. Other companies, such and Walmart and Amazon, bring unique value in other ways. For example, Walmart built the most efficient distribution and inventory management system so they could offer a limited selection of products at low prices. On the other hand, Amazon built a distribution model that allowed them to sell a huge variety of products at low prices and make both the ordering and the delivery process efficient and inexpensive.
- Once a good idea is born, and as a business grows, the business owner must develop a strategy that articulates how the product or idea is going to be developed and delivered to the customer. The strategy must clearly identify the value proposition offered by the business. The strategy also provides a roadmap, both initially and as the business grows, for the owner and the employees to follow. This strategic plan includes a business model that explains how the business will make money. The plan also discusses the employees and other resources that will be required to launch the business successfully and for the business to grow.
- The owner must have good people skills. This is essential because the primary value of any business is in its people. In addition, despite technology, people make all buying decisions. Business owners who do not have good people skills will struggle to find and retain good employees. They will find it difficult to grow because they cannot recruit and retain talented people. They will find it difficult to obtain and retain customers because they do not understand that the customer’s needs, as well as their employees’ needs, are more important than their personal wants and desires.
- Successful business owners are able to execute their plan effectively. They look carefully at their own strengths and weaknesses with regard to implementation. Then, they hire good people to work for them who have complementary skills. When needed, they are willing to hire part time employees and/or consultants, because they realize this is a cost effective way to fill some needs of the organization. They include objective metrics in their implementation efforts to make sure that they are really being successful rather than basing their understanding of how successful they are on gut feel.
- Every successful business owner that I have worked with over the last 22 years has good business acumen, either personally, or by hiring an employee or a consultant who provides this to them and the business. What is good business acumen? It is good common business sense. It is an inherent understanding and feeling about how the business is doing, how the market is, and what actions need to be taken to take to lead the employees to do the things necessary to increase the organization’s success. A couple further points about this key attribute:
- This is the hardest thing for a person with a corporate background to deal with when they buy a small business. Most corporate positions are so narrow in focus that the person becomes a master of a very narrow set of skills. In addition, the corporate world insulates the successful manager and employee from many of the most critical elements involved in a small business. For example, almost no one who comes out of a corporate background or has been educated in an “entrepreneurial” program at a business school has any clue about managing cash flow. Managing cash flow may be the most critical skill for a business owner.
- I have met and worked with many successful business owners over the years who do not have good business acumen. Yet, they all share several things in common. Specifically, they are smart enough to realize that they are weak in this regard. They do not have strong egos, and they are willing to hire employees and consultants that will help them with the day-to-day issues of business such as cash flow.
- This leads to one of the last attributes. While business owners must have talent, work hard, handle people well, etc., they cannot be egotistical or so full of themselves that they think they have all the answers. They must realize they have weaknesses. Having acknowledged that, they then need to find people with complementary skills to help them. They must be able to accept it when they are wrong, even when they don’t like it. Further, they need to be willing to listen to people who are equipped to help them. Arrogant, full-of-themselves, pompous people may be successful for a while, but eventually the game of business will humble them. Modest people who listen have a much better chance of long term business success.
- Finally, successful business owners must have balance in life. Owning a small business, particularly at start up, but also periodically during its life, require very hard work and often long hours. But the successful business owner must have balance, only working excessive hours when really necessary. In addition, the business owner’s spouse and family must recognize that sometimes the business will interfere with the family for short periods of time. However, if managed properly, over the long haul, the business owner and their family will enjoy freedoms and rewards that truly represent the American dream.