I made a presentation yesterday to a group of credit managers wanting to know more about the challenges facing small business – and how to tell good credit risks from bad.
That’s pretty hard to do, since the future can’t be known, small businesses’ finances tend to be opaque to anyone from outside, and, of course, because there's often only a very thin line between success and failure.
But I took a shot at it. Based on my experience as a small-business writer, researcher, editor and consultant, I came up with a list of nine characteristics of a business (or its management) that tend to correlate with small business success. I’m sure there are many more (leave a Comment if you want to suggest some), but here is my list:
* having (and better still, actively revisiting) a current business plan
* access to outside capital
* the owner has a college, university or graduate degree, or substantial industry experience
* the owner has previously run a business
* support of a board of directors or advisory boards
* being founded or run by two or more partners who possess complementary (not duplicated) skills and experience
* exporting their products and services to at least one other country
* the company is actively adopting automated systems and proven processes to become more efficient – giving the owner more time to work ON the business rather than IN it.
* the company is involved at the intersection point of two or more fundamental trends (see earlier post: Where Trends Converge).
To get a feel for the owners’ commitment to the growth and success of their business, I proposed asking them these four questions:
- Tell me about your business plan. How often do you update it?
- What processes are you developing to make the business independent of you, day-to-day?
- Who are the key people in your organization, and what are you doing to make sure you retain them and keep them motivated?
- Do you have a succession plan to ensure that you develop key people, and that the business will be in good hands if something should happen to you?
2 comments:
Hi Rick,
I am a regular reader and enjoy stopping by to check out your posts. What makes a small business successful is an area of keen personal interest so I thought I would take the opportunity to de-cloak.
Assuming that the small business is knowledge based, export oriented and planning to grow into a large business here are four characteristics I have observed that successful small businesses have in common.
Mission, Vision and Value is the cornerstone of any great company. MVV provides an indication that the company has an understanding of who they are, where they are going and what is important to the corporate culture.
Focus on results. There is a culture within the company that focuses on accomplishment and results tied into the MVV. My experience is that companies that focus on results tend to achieve them while those that wrap themselves in tactical and procedural tasks tend to stagnate.
Adaptability. The company has the discipline to have a plan but this is tempered with knowledge and skill to adapt to changing circumstances in the market.
Leadership. The leader of the company has the soft skills, business acumen and determination to effectively lead the company.
I recently wrote an article for the Ottawa Business Journal after speaking with the CEO’s of many local knowledge based export oriented businesses. I included quotes from five of the CEO’s in the article that I thought showed promise. Since the publication of the article on September 18, my top two picks MODASolutions and Triacta have each received VC funding of $12.5M and $1M respectively.
Cheers,
Ian Graham
Dear Rick,
Your post seems to be very interesting for me, moreover it is helpful. I am writing a course paper on small business, so I want to thank you for the information.
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