How to run a small business
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A couple of weeks ago, I shared my thoughts on how to buy a small business. Since then, a number of people emailed me to ask how to actually run a small business. Easy enough!
First things first, running a “brick & mortar” business is much, much harder than anyone initially thinks. When I first took over my family’s construction company, I thought it was going to be a piece of cake. I mean, how hard can it be to build a retaining wall or get a few customers to sign some deals? By the end of the first day, my life sucked. Reality had set in — I had problems: an employee who decided to get drunk on a job-site and a customer who wasn’t happy (and that’s an understatement).
So, in no particular order, here are my top tips for running your own small business:
- Make sure you have plenty of money. Cash flow is the life blood of your company. Unfortunately, I’ve seen far too many first timers make the mistake of spending their cash before they had it in their bank account. (One of my favorite books on finance for first timers: The McGraw-Hill 36-Hour Course In Finance for Non-Financial Managers)
- Remember who’s boss. When I first started running the business, the field staff was telling me how to run the business. They’d say, “I’m not working on weekends!” or “You need to pay me overtime for weekend work.” I was inexperienced and I let people tell me what to do — the tail was wagging the dog.
- Staff with care. Hire for people skills, you can train the rest. You want people that aren’t just looking for a paycheck, they have to want to be there. Give me someone that can effectively talk to people, I’ll teach them how to build a patio.
- Don’t be afraid to fire people. It takes a lot to make a business run smoothly. In the first year or two, don’t be surprised to see 300%-400% employee turnover. By your third year, you’ll figure things out and turnover will drop to 10%. If someone isn’t working out, let them go — it’s better to be short-staffed than to give bad service.
That’s pretty much all there is to it. When in doubt, just remember that being successful is really about doing a few simple things right and learning from the mistakes you make along the way.
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