But, according to Bill McBean, there are other important facts about business ownership. Facts that could help you avoid the mistakes and pitfalls that trip up so many others, and go on to achieve the success you’ve dreamed of. He calls them the Facts of Business Life.
“Of course, there are a variety of skills owners need to know in order to make a business work,” said McBean, author of the new book The Facts of Business Life: What Every Successful Business Owner Knows That You Don’t. “But after many decades of running my own successful businesses, and learning how other successful owners have created success, I have come to the conclusion that these facts are the seven essential concepts needed to create a successful business life.”
In The Facts of Business Life, McBean provides a thorough explanation of each fact and why their sequential order is important. And, he defines the five levels through which a successful business evolves — its life cycle: Ownership and Opportunity, Creating Your Company’s DNA, From Survival to Success, Maintaining Success, and Moving On When It’s Time to Go.
In addition, The Facts of Business Life makes it clear when each fact should be implemented and how they should be implemented on each level. McBean explains how and why each level signals to an owner that it’s time to change up the way he or she leads, manages, markets, etc., and he provides actionable advice on how to proceed.
“Now, don’t get me wrong,” McBean said. “There are no guarantees for entrepreneurs — and to add to the challenge, each business is one of a kind, in terms of how it competes, its constraints, and how it operates. But what you can do is tilt the odds in your favor.”
McBean’s seven Facts of Business Life are:
Fact 1: If you don’t lead, no one will follow. At first, this statement seems mind-numbingly obvious. But what does it look like in action? According to McBean, good business leadership begins with defining the destination and direction of your company and deciding how the business should look and operate when it arrives. But it doesn’t stop there. It also involves developing and continuously improving on a set of skills in order to move your business from where it is today to where you want it to be tomorrow.
“What’s important to understand is without effective leadership your managers or employees have no idea what is important to the owner, what to manage, or what success and failure look like,” noted McBean. “In other words, in order to have effective employees, your business first has to have effective leadership, which has to include defining success and failure based on the eventual destination. Another important aspect of being a good leader is developing a company culture that’s expectations-based, and rewards those who meet and exceed those expectations. The good news about leadership is that the most important aspects can be learned, and it’s essential that owners do so.”
Fact 2: If you don’t control it, you don’t own it. Control is the owner’s management reality. If you don’t control your company by defining key tasks and dictating how they must be handled, and “inspect what you expect,” then you don’t truly “own” the business because all you are is a spectator watching others play with your money.
“There are two overriding or macro concepts successful owners understand over their unsuccessful competitors,” explained McBean. “First, great procedures and processes need controls, and these in turn create great employees. This happens because procedures and processes operate the business, and employees operate the processes. This is one of those business basics that owners must understand to be successful.
“Secondly, don’t stop at pointing out what should be done and how. Also clearly state and emphasize that there will be consequences when standard operating procedures and processes aren’t followed. If you don’t do this, you’ll be ‘leading’ a group of individuals who follow their own rules and judgment, rather than a cohesive company working toward a common goal. Once again, this is one of those business basics owners can’t ignore.”
Fact 3: Protecting your company’s assets should be your first priority. Were you surprised because this fact didn’t instruct you to first protect your company’s sales, profits, and growth? If so, you’re not alone. But the truth is, assets — which include both tangible and intangible assets — are what power sales, profits, and growth, said McBean.
Usually, owners and soon-to-be owners understand the need for insurance on assets like their buildings and equipment. In fact, bankers insist on insuring specific assets they lend money on like facilities, equipment, and sometimes even insurance on an owner’s life. However, successful owners don’t stop at protecting obvious assets. They understand the importance of every asset, because assets represent invested cash, which should be managed to produce exceptional and maximized profits.
“Ignore this business fact and your company will underperform — if it can even survive the continual asset write-offs and write-downs, customer abandonment, and employee indifference,” said McBean. “I believe protecting both tangible and intangible assets to be one of the most underrated and underappreciated ownership issues today, and, if mismanaged, can be one of the most damaging. The key is to understand what all of your company’s assets are, and then guard them closely and work to maximize the profits they represent. Because if you don’t, they will haunt your business and cause financial pain when you least expect it, or want it.”
Fact 4: Planning is about preparing for the future, not predicting it. Nobody knows what tomorrow, next week, or next year will bring for your business. But you can make educated guesses based on the most current, accurate information available as well as your own past experiences, and this should be an ongoing process. Effective planning, McBean asserted, is a mix of science (gathering pertinent information) and art (taking that information and turning it into a plan that will move your business from “here” to “there” over a specific time period).
“Being able to plan better than your competitors can give you a significant competitive edge in the market,” he said. “Ford Motor Company is a great example. In 2008 and 2009, its competitors, GM and Chrysler, ran out of cash and needed taxpayer bailouts to avoid bankruptcy. But not Ford. Years prior to the credit crunch, Ford began to restructure its debt and raised billions as it continually added to cash reserves. Was this luck or good planning? Industry insiders will say good planning. The point is Ford knew, as you should, that planning is important because it focuses owners on what’s important and it prepares them for what lies ahead.”
Fact 5: If you don’t market your business, you won’t have one. Maybe working to market and advertise your products and services isn’t your cup of tea. Or maybe you believe your products and services are so great they should speak for themselves. If so, too bad — you’re going to have to do it anyway. The bottom line is, if people don’t know about your products and services, you won’t be successful.
“New business owners especially are nervous about marketing because money is already so tight at this stage,” acknowledged McBean. “But again, if marketing isn’t done, very little good will happen. You have to make the necessary effort to connect consumers to your company. And when you do, you’ll begin to see marketing as the investment it actually is, rather than the expense that less successful competitors think it is.”
Fact 6: The marketplace is a war zone. Every company has competitors, and if it doesn’t and it’s successful, it soon will. Successful owners know they have to fight not only to win market share but to retain it as well. That’s why McBean insists that you must develop a warrior mentality and maintain it for as long as you’re at the head of your business.
“That’s because selling and sales in any industry is serious business,” said McBean. “It’s take or be taken from. If that isn’t a business war zone, then I don’t know what is. In other words, in order to be successful and remain that way, you have to continually focus on the market, react to it, and fight for what you believe should be yours. If you don’t, your competition will win the war. The point being great marketing has to be followed up by having your company ‘on its game’ in order to capture every customer your marketing attracts.”
Fact 7: You don’t just have to know the business you’re in; you have to know business. Yes, of course you need to know the inner workings and nuances of your particular industry if you want to be successful. But you also need to understand the various aspects of business as it is more broadly defined, such as accounting, finance, business law, personnel issues, and more, and how all of these impact each other and the decisions you make.
“Having tunnel or limited vision as far as business knowledge is concerned is akin to dropping out of high school,” said McBean. “In doing so, you limit your possibilities for success and how great your success could be. But at the end of the day, what is most important is not how much you know, but what you know and what you do with that knowledge. For example, it’s important to know what’s going on in your market, but it is just as important to know what to do with that information and how you can translate it into more sales and gross and net profits — something that can’t be done with limited business knowledge. And remember, it’s an owner’s responsibility to make sure what you’re learning is correct and relevant.”
“Ultimately, I don’t believe that any entrepreneur can succeed — or at least reach his or her full potential — without knowing, understanding, and applying these seven Facts of Business Life,” stated McBean. “It’s equally important to understand how these facts are interrelated.
“For instance, being able to develop strategic plans or market your product will mean little if you don’t have a good grasp of business in general,” he concluded. “But I promise, if you commit yourself to understanding these facts while being prepared for their implementation to change as your business goes through its inevitable life cycle, you’ll be creating a best-odds scenario for success.”
Bill McBean is the author of The Facts of Business Life: What Every Successful Business Owner Knows That You Don’t (Wiley, October 2012, $24.95, www.factsofbusinesslife.com). McBean has started and operated several successful businesses. He is currently general partner of McBean Partners, a family-owned investment company. He is also partner and chairman of Our-Mentors, a company that works with owners to improve their businesses for long-term success, and Net Claims Now, which provides companies in the restoration industry with invoicing, accounts receivable collections, cash flow services, business coaching, and business lead generation services.
Publication date: 12/3/2012