PAUL’S SMART BUSINESS TOOLS

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Welcome to this blog on Smart Business Tools. As you grow as an entrepreneur, you acquire various skill sets along the way that you can keep in your business toolbox for future use. I’ve been an entrepreneur since I was a teenager. I’ve learned valuable lessons throughout my career that have significantly impacted me and shaped my thinking and approach to business.

I’ve pulled out a few tips I’ve found to be the most useful throughout different stages of my career. These areas may not get much attention, but I’ve found them to be essential in successfully growing a company.

SELF-EMPLOYMENT ANALYSIS

What inspired you to start your business? What was your vision? It may seem like a simple question, but it’s an important place to start.

I asked a group of my male mentees this same question, and their answers varied. For one, it was about the opportunity to impact those they worked with and their community. For another, it was the reward that came with seeing a vision actualized. Another looked forward to the challenge of knowing the success of the company fell squarely on his shoulders, and he had a chance to make it work.

Being in business has its rewards, but when you’re in the early stages, you rarely think about the difficult aspects of it or the mistakes you could make. Business challenges can range from bad partners, misguided hires, difficult decisions, inexperienced consultants, or even letting people go. Your motivation for starting your own business and your vision is what will keep you going through these seasons.

To make it in the long run, you need to have some strong disciplines and good reporting systems in place. Running a business is not for everyone. It carries a great amount of responsibility and requires sacrifice, commitment, and discipline.

MODEL TO SEE IF YOUR BUSINESS IDEA IS WORTH IT 

Modeling is an exercise that takes time and effort. However, one of its key benefits is in helping make informed decisions. Modeling can be used in various scenarios such as personal finances, projecting sales, launching a new product line, and especially when starting a new profit center/business. Developing an effective model requires factoring in variables such as past performance, future revenues, expenses, and other key elements.

The process pushes one to think about and write down the various influences that may impact the different aspects of the scenario. This detailed analysis has the additional benefit of giving one a better understanding of the opportunity they are modeling.

Once you’ve completed your model, it is important to stress test the model by changing variables that could likely be different than your original assumption, which could be in either a more aggressive or conservative direction. This will provide you additional valuable insight.

The main advantage of using models is they are forward-looking, thus allowing you to assess risk or potential areas of growth. I have been modeling for well over 40 years now, and it’s one of my most valuable business tools. I encourage you to get into the habit of modeling big decisions before committing to them. It will help you understand where you currently stand, your performance in the past, and what you can look forward to in the future.

CALCULATE YOUR NET WORTH A MINIMUM OF ONE TIME PER YEAR

Do you know what your net worth is today?

When you hear the phrase net worth, the image that often comes to mind is of industrial tycoons living lavish lifestyles. Very rarely do we apply that phrase to our own lives. However, it is not reserved for the uber-wealthy.

I have found tracking my net worth to be a valuable exercise. For the past 50 years, I have calculated both my personal and business net worth and tracked its performance. I created a simple model that has evolved over the years that allows me to understand the sum total of all I own minus all liabilities. Calculating my net worth works as a great benchmark and provides a clear picture of my financial health. If you don’t already, I encourage you to get into the habit of doing this once a year.

Tracking your net worth over time allows you to see how close you are to attaining various financial goals and how things have progressed over years of history. It also provides you with information for big financial moves, like buying a house or your children’s education.

Looking at your net worth annually allows you to understand where you are on your financial journey.

SURVIVING

There are many reasons why nine out of ten businesses fail. Being self-employed and running your own business requires you to have a survival element as part of your thinking, so you can do what it takes to succeed in the long term.

Surviving and thriving as an entrepreneur takes courage and focus. There’s a lot riding on the business; you have employees that rely on you, a family that depends on you, you have invested a good amount of capital, and you need to keep it running day to day. Ensure you put in the necessary hours to think through the details of your business and stay on top of the many areas I’ve discussed in my business posts.

Entrepreneurship and being the last one paid is tough. However, with the right knowledge, skill set, vision, and determination, you can stand out and be very successful.

KEEP YOUR OVERHEADS LOW

Keep your overhead as low as possible until you’re at a point where you’re generating profits, and then reconsider how much to reinvest in the company. Resist the desire to grow your overhead until you have proven your business model. After the business is up and successful, avoid the temptation of reinvesting all excess revenues. Instead, pull-out capital on a regular basis and invest it for retirement.

MAKE TIME FOR YOUR FAMILY

Starting a business will no doubt take a significant amount of time and hard work. Be sure to take time out for you and your family as well.

DON’T EVER COMPROMISE ON YOUR VALUES

There is never a reason to compromise on your values. It will come back to haunt you even if you’re the only one who knows about the compromise. Staying true and steady will reap many rewards.

COMMUNICATION IS KEY

Lead with vision and take the extra time needed to show the team where you want to go rather than telling them what to do. Communicate your expectations clearly at the beginning and put them in writing. Candid communication is usually greatly appreciated by successful people.

SEEK WISE COUNSEL

There’s a difference between where we put our confidence and where we can get insight, education, or wisdom. Choose to have good solid counsel around you. All too often, we hold our own advice. I share more on this in my blog, Partnering with God.

LEARN FROM YOUR MISTAKES

Never get extremely worked up by the first mistake created by a team member. Require your team and yourself to learn from your mistakes the first time by reviewing them and creating a game plan to avoid repeating the same mistake in the future. Hold your team accountable should they make the same mistake a second time. Maintain a log of learnings ( grouped by category) and review them as appropriate. You can read further in my post about Learning From Your Mistakes here.

PRACTICE WHAT YOU PREACH

Hold your team to high standards while at the same time holding yourself to at least the same standards, if not higher. Practice what you preach, and others will follow. Require your team to be candidly honest with you and provide the same in return to them. Don’t participate in office politics and minimize it at every opportunity.

A WIN-WIN ENVIRONMENT

Create a win-win environment for everyone on your team. Have everyone participate in the success you achieve together by creating a bonus structure that rewards every individual for their participation, sacrifice, and service in advancing the company’s business plan. Money does not need to be a main motivator, but everybody appreciates being acknowledged and rewarded for their service. Eliminate scenarios where either the company wins, and the team loses or vice versa. In situations where things aren’t going well (‘a lose-lose situation’), everyone should be working hard to turn it around to a win-win. This is a philosophy I strongly believe in, and I share more about it in my post, Building an Effective Compensation Strategy.

PERFORMANCE REVIEWS

Complete reviews on a timely basis and utilize a format that’s been tested. These reviews are a great time to reduce key discussions, outcomes, and goals, etc. to writing, review the goals set at the previous review, identify and encourage accomplishments, and address shortfalls. You can read more on this topic in my post titled Great Manager – Unleash the Power of Your Team.

Those are a few of my essential business tools. Do you have others that you have found to be useful in running your organization? Please share them with me in the comments section and help others learn too.