The Should I Own A Business Podcast

Managing a Business and Leading It

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Leading and managing a business effectively is essential for a business owner to be successful. Most business owners only really focus on managing their business and miss the other crucial leadership aspect of their role. The skill sets of leaders and managers are different and some people have both.

A business owner has to be an effective leader and as well as manager. Here are 7 Pillars that a business owner can use to combine both leadership and a general management perspective. We also explain the difference in being a leader and a manager.

Here are 7 Pillars to develop leadership and general management perspective:

  1. The Difference Between Leading and Managing a Business
  2. Shaping Business Culture
  3. Technology and Digital Transformation
  4. Efficiency as a Competitive Advantage
  5. Money
  6. Why Innovation is Imperative
  7. Your Personal Development

Owning a business is easy since you can start one in minutes online, registering a business name, incorporating a company, and buying a domain name. In contrast, managing a business that will thrive long term is much harder.

1 What is the difference between leading and managing a business?

Every business has many “moving parts,” which have to work in harmony for the business to operate efficiently. Getting everything to work harmoniously in order to achieve your goals could be described as managing a business.

In Episode 6 Critical Business Functions, we outline what some of those “moving parts” must be.

Leading a business includes having a vision for direction of the business and inspiring the mangers and employees to achieve the long term strategy. Leadership courses try to impart the skills needed however, some people make good leaders and others do not.

Managing a business

Getting your business running smoothly and effectively is crucial, but it is only one part of the success equation.

Another fundamental part is whether you have nailed the right value proposition, strategy, and business model in the first place. If you haven’t, you might be in trouble, no matter how well you manage your critical business functions. Getting these things right also requires a degree of market knowledge, acumen and entrepreneurial flair.

You can read more about this article on our 3 step process to evaluate a business idea.

Surely that’s all you need, well, actually, no. There is the tricky subject of You, yes, You.

The Should I Own A Business (SIOAB) Podcast is about exposing the reality of business ownership, as well as what it takes to be successful. In SIOAB Episode 2 You-360, we explain how critical you are to success and why we place so much emphasis on this.

To build a very successful business you must get beyond basic survival and create value in your new venture.

Many businesses that survive have gotten to grips with their critical business functions, yet, this does not mean that they are valuable businesses. It just means they survive, perhaps with very marginal performance.

Managing a business requires leadership and not a narrow technical or operational view. We consider managing and leading a business as a General Management perspective.

Leading a business

Nearly all leadership training and material is aimed at the leaders of large enterprises. However, every business needs a leader because without direction, nothing happens.

Successful businesses have good leadership.

A Business Owner has a massive responsibility as the business’s role model from which the behaviors and culture will emerge. Your employees take note of what you do or do not do, and say or do not say! Your acts and omissions are carefully noted and discussed by employees; therefore, you are always on show!

Good leaders often have empathy, especially with customers and employees.

Consequently,  having a strong technical or financial understanding does not necessarily equate to effective leadership. Interestingly, neither does serial entrepreneurship as serial entrepreneurs may have qualities such as a high pain threshold to failure or risk. Often they value their judgment more than other people, which means they are not necessarily great leaders or team players.

Good leaders are open-minded, balanced, and continuously seeking personal development. They are decisive and know that businesses need leadership rather than democracy.

Consultation and inclusive engagement are vital, but this does not equate to running a business as a democracy.

The leader’s role is to manage change, not maintain the status quo, as the future will not be the same as the present.

The Business Owner-Leader

There is a correlation that weak leaders have under-performing organizations.

The skills of technicians, entrepreneurs, managers, and leaders are very different. Recognize where your skillset is weaker so that as your business grows, you can bring in people to your leadership team to compensate for your weaknesses.

Confident Leaders value constructive criticism as this improves the quality and robustness of their decisions.

Smart Leaders avoid the temptation to recruit clones since teams from diverse backgrounds and views bring much broader scrutiny to decisions. Teams with members from different backgrounds are stronger, even if they are sometimes more challenging to manage.

As the Owner-Leader you must develop an in-depth knowledge of the business environment in which you operate.

Use this knowledge to understand how your business can uniquely fit into the business landscape-even if it is very crowded. To set your business apart from its competitors, you must be prepared to set yourself apart with superior knowledge and thinking.

The Owner-Leader must craft the organization to maximize a real competitive advantage.

2 Shaping Business Culture

We define business culture as:

the collective personality that is experienced internally (by employees) or externally (customers) through their interaction with the business.

Building a successful business requires the right culture and the Owner-Leader shapes this.

Traditionally, employees get recruited on their technical skills, and their culture just added to the collective mix. They have a positive, neutral, or negative impact on the overall culture. The business culture evolves randomly.

Remember, one bad apple can spoil the rest.

In smaller businesses, a new team member has a more significant impact because they represent a higher proportion of the team.

Culture is part of your brand

More progressive organizations realize that their business culture is part of their identity and character that needs preserving and nurturing. The culture is part of their brand essence as it attracts employees and customers who value it. The culture, therefore, has intrinsic brand value, which can add significantly to the business value.

Such organizations think carefully about their values and the elements of the culture they wish to nurture. They are proud of the culture and frequently talk about it, along with their vision. New candidates are screened to ensure they will complement the business culture. Candidates’ technical skills are only part of the selection criteria.

SMBs who emphasize their business culture see their employee selection approach as an investment. So much money, time, and emotional effort are required to bring an employee into a business and train them; it is wise to select carefully.

In many countries, it has become harder to remove people from the workplace, so selecting the right ones in the first place has become even more critical.

Remember, a poor culture will beat a great strategy every day.

Avoid random culture changes by picking your “apples” carefully.

Diverse teams are stronger

Recruiting people who have shared values does not diminish the need for diversity. Diverse teams will always outperform “cloned” groups as they can draw upon more extensive experience and creativity when addressing challenges.

Resist the temptation to recruit like-minded individuals, as this makes you feel comfortable but results in a less robust organization.

Developing your business culture is a critical role for you as culture makes your business come to life.

3 Technology and Digital Transformation

Digital technology is everywhere; therefore, having the right technology is vital.

There are two main aspects of technology to consider.

Firstly, choosing best technology choices for you and your business covering everything from marketing, sales, operations, compliance, finance,  that will give you the most productivity at the least cost.

While there are a plethora of ‘apps’ available that all promise to talk to one another seamlessly through APIs, the reality can be very different.

Its increasingly hard to evaluate some apps as the information provided is scant. The developer’s tactic is to get you to sign up for a free trial period, which then becomes a paid subscription.

If you experience difficulties, it is sometimes hard to get them resolved or a human to ask. We see these frustrations over and over.

External influences

Secondly, is the external influence of  technology on on your business. Understanding what changes are likely to occur and how you can adapt to them and thrive can be tricky.

Virtually every business that relies on the internet or social media is being affected one way or another. Specific industries are already being disrupted by Artificial Intelligence (AI) that can automate processes and engage with customers.

Shifts in marketing and customer engagement are current examples of how small businesses are being forced to adapt.

There is a massive interest in this subject, which often gets lumped under the heading of Digital Transformation. The reality is that technological impacts will continue and, if anything, increase in their pace and complexity, especially as Artificial Intelligence advances.

Unless you can make some basic predictions and have the ability to adapt, you might well suffer.

Many organisations fall in the trap of thinking that technology will solve their business problems and it will not.

Digitally transforming a poorly organised business will not improve it’s fundamental problems.

4 Efficiency as a Competitive Advantage

Managing a business means that you inevitably have competitors, and therefore, you need to create a competitive advantage. Productivity is a secret weapon for competitive advantage, but it is seldom seen this way by SMBs.

Companies that embrace and implement Continuous Improvement (CI) drive up their efficiencies and develop long term competitive advantage in their sector.

Your goal should to be to achieve a 20-30% lower cost base than your competitors.

Yes, that’s right – it is not a typo.

Stop for a minute and imagine what difference it would make to owning a business if you had a 20-30% cost advantage over your competitors.

The size of the prize

Businesses can have hidden inefficiency of 20-30% of their sales turnover, which is enormous. The cost of inefficiency can dwarf your net profit and therefore represents a massive opportunity.

Aim to build your organization with a business culture that creates a massive competitive advantage and yields superb cash generation.

Continually improving your business efficiency in every single area of your business allows these savings to compound.

Above all, recognize that this approach is about a mindset and business culture that You need to champion. This is a good example of combining leadership and management.

Continuous Improvement does not work if you delegate it to your team, and you carry on without changing your focus. It is not about just implementing nice-sounding systems and jargon.

Ingrain Continuous Improvement as second nature in your business and your people.

5 Money

All businesses exist to make money, and therefore understanding the financial position of your business is crucial.

Surprisingly, many business owners struggle with this and we suggest adopting a money mindset for success.

Make interpreting financial information part of your personal development. Be confident in producing budgets, interpreting profit & loss statements, and balance sheets.

Abdicating this responsibility to someone else is not acceptable, so practice till you master this.

Cash flow is probably the most misunderstood financial control when managing a business. Lack of cash is a major cause of business failure. You can go bust when there is insufficient cash to pay your liabilities, which means a profitable business can go bust.

A business can survive for long periods with low profitability but will die quickly without cashflow. Hence the term Cash is King!

Understanding profit and cash

Cash and profit are related, but they are not the same. Profit is what is left over after all your costs. You can estimate this for specific jobs or a period. Cash is the money that you collect and payout. Cash flows through your business depending upon the timing of payments received (e.g., from customers) and made (e.g., to suppliers or employees).

Increasing profit margins, lowering costs, and improving credit control can make dramatic improvements to a business. Reducing your stock holding or the time it takes you to produce your service or product will also help boost cash flow.

6 Innovation is Imperative

Innovation can give you new products and services that can make you different from your competitors. New products and services can make you more appealing to customers and provide an opportunity to grow sales. They also can be branded, positioned, and marketed differently to increase prices and profit margins.

The more you can create uniqueness, then the harder it is for your customers to find alternatives and compare prices. Less competitive pressure on your prices and, therefore, higher sales volume, higher profit margins, and increased cash are potential benefits.

Fostering a culture that seeks new ways of working, interacting with customers, and introducing new products or services is vital. Each act of innovation is a point of difference between you and a competitor and an opportunity to improve sales or profitability.

Lots of small differences can add up to a competitive advantage.

7 Your personal development

Your personal development is paramount if you want to thrive in the long term.

Leading and managing a business is a marathon, not a sprint, as your business must achieve sustainable growth over many years ahead.

Developing your knowledge and business acumen is an investment that will pay you back over the years to come.

Use your knowledge to make better decisions by predicting their impact and risk.

Initially, you may find you are overwhelmed managing your business and, therefore, not have the time energy or inclination to seek out new business knowledge.

Having good routines and time management can help.

Find an experienced mentor or a peer group, which can be informal ways of picking up advice quickly.

Time management

You can feel very time-poor with a never-ending to-do list.

Prioritize what has to been done and keep working on the most important thing.

Plan how you will spend your week and allocate time in your calendar for those things.

If you don’t manage your time, everything seems equally needy, with the risk of you working 24×7 and still not coping.

Remember the importance of Wellbeing in and looking after yourself, so set time aside to look after your self in the calendar!

Some useful tools that might help are apps such as Trello. Trello enables you to map out your tasks and manage your foremost priorities. Setting up a simple Kanban approach can help, which you can share with your team.

Make time to day dream

Modern life is hectic, and the tyranny of the urgent can dominate our minds. Stop the incessant notifications of emails, text messages, social media posts, calendar reminders, etc.

Do not risk expending all your resources dealing with short term items. Allocate time for long term planning and “deep thinking”.

Organize some time where you do not have a distraction and can think clearly. A technique is to visualize yourself and your business in the future. Daydreaming is a creative process where you think of things without a particular influence.

Too many business owners are the “hamster on the treadmill”.

Effective leaders make time to think which enables them to have strategies and plans.

Goal setting techniques.

The classical forward goal setting approach is to consider your current position (or origin) and plan steps logically from the origin into the future. You plan and progress based upon a series of steps or building blocks using your origin as the foundation.

Your goals inevitably will be based upon what you think you can achieve, using a set of assumptions.

New or inexperienced business owners often think in this purely logical forward-thinking way, especially, when writing business plans.

This mindset is similar to project management, which works well with a defined outcome and resources.

Try reverse thinking.

Don’t just think in this classical way but try a reverse mode. Start by imagining a position or condition that you would like to achieve in the future and then work in reverse to define the steps to achieve this goal.

Take into account your core strengths and capabilities, along with opportunities that you see in the broader market. Take inspiration from other industries or best practice benchmarks.

Be less concerned with a defined outcome or even the resources you might need and focus on what you might be able to achieve.

“Be focused on what you might be able to achieve rather than how you will achieve it.”

So, what’s the big difference?

In the forward-thinking style, the hidden trap is your current circumstances, and resources might constrain your goals. You might underachieve on your potential because your current limitations dominate your mindset.

This classical method is also internally focused and incremental.

The reverse goal method focuses on what you want to achieve rather than your origin and current resources. Plans and visions are, therefore, not constrained by your current limitations, which can lead to much larger ambitions and achievement.

It also provides the opportunity to think more creatively and consider the direction that the business should take.

A more externally and cross industry-focused style that encourages targets using best industry practices and new ways of thinking.

Business planning

In the blog  Evaluate Your Business Idea, we speak about the concept of design thinking and business planning.

Successful businesses focus on a well thought out business model and a business plan.

It’s essential to plan your business before you start and keep planning it once you start!

Reviewing your plan will highlight where things are going well or not so well, so you can take action to improve your performance regularly.

“Set and forget” business plans are a waste of time. We like Liveplan, which is an excellent way to keep your business plan updated.

Develop your management technique to include daily, weekly, and monthly reviews rather than just annual tax planning. Ensure your team has simple KPIs that will encourage the performance you want and get them to explain their KPI results daily.

Focus on KPIs will become an essential part of the business culture you create.

Your comfort zone has gone

Managing a business will challenge you, and new entrepreneurs are sometimes surprised how uncomfortable this can be.

Your comfort zones get challenged frequently. For example, you might be uncomfortable meeting people or being your sales ambassador, but you still have to do it and do it well.

Extroverts are comfortable in the sales and marketing areas. They can confidently talk to strangers at networking events or engage with people through cold calls. They deal with rejection like water off a duck’s back.

More introverted types find this very uncomfortable and often avoid these situations. Rejection and being in these situations can be very stressful for some people.

If your business will rely on you as the primary person to get sales- how do you feel about rejection?

Confrontation and conflict are inevitable when managing a business. Dealing with employees who take too much time off or regularly make mistakes is not uncommon. Customers who complain-sometimes, quite unfairly, and refuse to pay need handling.

How well do you handle conflict?

It’s essential to recognize that you must push yourself to deal with specific functions or situations that you don’t like. Avoiding them or pretending that they will go away doesn’t usually work out well.

We frequently discuss the need for personal development (for example, SIOAB Episode 5 How to Use Your Excitement) as nobody is perfect.

Business owner wellbeing gives you insight into things you can do to ensure your wellness does not suffer along the way.

Understanding business ownership

The Should I Own Business Podcast shines a light onto many of the challenges the new business owners experience so that you can prepare yourself.

Give yourself the best chance of success by understanding what leading and managing a business is like and if it’s right for you.

We have a free Business Readiness Test that has lots of information to help you decide if owning a business is right for you.

Successfully leading and managing a business is the goal of a successful business owner.

 

Brendan Barrow Co-Host

The Should I Own A Business Podcast

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