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Bulletproof Your Business

By Brad Forsythe

Five Tips for Small Business Success

"How can I improve my business?" is the question I hear most frequently from CEOs, business owners and entrepreneurs. Thirty years of business success, combined with learning from some of the world's top business school finance professors, have shown me three key management control levers you can pull to improve your success - Improving Profit Margin, Increasing Asset Turn, and Improving Financial Leverage.

These three control levers are built into the following business tips, and are practical for use by any small company, empowering them to grow their bottom lines and to enjoy a more rewarding experience. Great executive brilliance isn't required to use these tips. They're simple - just like great companies. You need only focus, passion and common sense to use them well, and risk management is the cornerstone of these tips.

Tip #1 - Keep your business simple and focused

Every success begins with a simple, focused strategy. Even companies with 100 or more employees can only deliver one or two product or service lines with excellence. You probably based your original business plan on a single product or service concept and focused all your resources on that one objective. Then reality arrived, and distractions pulled you in a dozen different directions.

Distractions are the kiss of death for small businesses, scattering focus from those few activities that truly make your money. Risk, coming from employees, suppliers, clients, and financial stakeholders, is your most common distraction, arriving in the form of threats and off-focus opportunities.

Hold fast to your simple, focused strategy. Control risk and distraction by implementing a proven risk-management business process specifically designed for small companies. The benefits of risk management aren't reserved just for the Fortune 1000 anymore. Excellent, cost-effective, practical risk-management models are now available to small businesses, and are relatively easy to implement. Well-managed risk relates directly to the management control lever called Improving Profit Margin. A recent USC study shows up to 100 percent increases in Return on Assets for companies that effectively manage trouble before it arrives.

Tip #2 - Culture is magic - and YOU are the culture

No matter how many hours you put in, your employees will still do the majority of your company's work and will serve most of your customers. Each employee is a precious and expensive key to your success. Before hiring a new employee, clearly communicate your corporate culture by explaining which behaviors will be rewarded and which will be punished. Then follow through without fail or you will confuse the message.

Never forget that YOU are the culture. Employees will emulate YOUR behavior. Smart employees don't listen to what you say; instead they watch you and follow your behavioral examples. If you are an example of superb execution of your work process, then you have every reason to expect your employees to produce similarly consistent, high quality and profitable work.

You rarely find employees who naturally think and act like you - you must provide a good example, train them, and carefully manage their work. Managing employee-related risks is critical. Use proven, low-risk business models to recruit, hire and train your employees, assess their performance regularly, and quickly terminate those who fail. Consistent use of good process assures quality control, greatly reducing your risk of employee problems and resulting legal expenses and distractions. Improving employee management efficiency relates directly to the management control lever Improving Profit Margin.

Tip #3 - Keep your promises

Many customers, suppliers, financial stakeholders and employees will initially grant the quality of integrity to you and your company. This invaluable quality is yours to lose -- but can rarely be recovered if you blow it. Unless integrity flows from the top down, your culture is dead, and your company will follow close behind. Make integrity the cornerstone of your culture. Keep your promises in a public way so that employees, customers and suppliers see your example. Integrity will draw and align the best customers, suppliers and employees with you. In my experience, customers will pay a little more to deal with high integrity companies, related directly to the management control lever of Improving Profit Margin.

Tip #4 - Speed is life

Identify those few activities that truly make your money. Then make them happen flawlessly and quickly -- ever more quickly. Speed delights your customers, frustrates your competitors and makes it fun for the best employees to work with you.

Speed translates directly into the management control lever called Increasing Asset Turn -- the second of those three key levers. Two vital clues to increased speed are to strip away every business element that isn't necessary, and to manage risks that, left unmanaged, will waste resources, distract your focus and slow your speed. You're never fast enough -- so never be satisfied with the status quo.

Tip #5 - Innovate, don't hesitate

Yes, innovation is risky and difficult. But failing to change and improve is almost certain death to your company. Innovate before competitors force you to do so. Manage the risk by keeping most of your innovations close to home; advance directly from the critical lessons and core resources you've already developed to deliver your current business plan. Focus your best resources on innovations that will truly make a change in customer buying behavior, while tasking all your people to find simple innovations in matters of speed and cost control.

These five tips are all about making your business less risky and more profitable. The best customers and commercial lenders are increasingly attracted to your company as your risk drops, because you also lower their risk when dealing with you. Attracting these two groups lets you use the third management control lever called Improving Financial Leverage. Better customers buy more, pay more reliably and have substantially lower maintenance costs. Better banking deals increase your access to more capital at a lower cost, and strengthen your cash flow. Risk management is the cornerstone to realizing all three of these fundamental management control levers.