Historically, only about thirty percent of new businesses survive during the first ten years of operation. Throw in the worst economic disaster since the Great Depression, and if you are a business owner, you want to model the habits of the most successful businesses.
Write a business plan. The purpose of a written business plan is to provide clarity of the business purpose for you and your employees, as well as potential future business partners. It should include detailed financial projections for the current year plus one to five years into the future. Key financial documents include a balance sheet, profit and loss statement and statement of cash flow.
Write a marketing plan. No business plan would be complete without a detailed marketing plan that describes how you plan to acquire and keep customers. Most marketing plans focus only on acquiring customers. Realize that it can easily cost you five times more to get a new customer than it does to keep one you already have. Be sure you have an excellent written customer retention plan.
Build multiple banking relationships. To support start-up costs and to continue to grow a business usually requires a good working relationship with a bank. As we have seen over the past twenty-four months, things can change rapidly in the world of banking, potentially leaving you in a financial crunch as bankers change lending practices with little or no notice. To protect yourself, build a relationship with at least two banks.
Build cash reserves. Many business owners run their business like an extension of their personal checking account, raiding it whenever personal cash runs short. Best business practices include a complete separation of business accounts and a reasonable cash reserve account. Consider contributing a specific percent of gross monthly receipts to a segregated money market account until you build up to a target balance for reserves. This will differ based on the type of business.
Build a great team. A fatal flaw for many entrepreneurs is to add people as they are ‘busting at the seams’; hiring pretty much whoever is available. The most successful entrepreneurs start by building an organization chart based on expected growth three to five years into the future and identifying the ideal qualities and qualifications for each of those future key employee slots. Be willing to ‘always be interviewing’ and be willing to hire before you need someone if they uniquely fit one of your slots.
Have a formal employee retention plan. Once you hire great people, it’s imperative that you have a plan for keeping them with an employee retention program. The key is a communication system whereby you let employees know what is expected of them; give them responsibility for their job activities; provide feedback; and create an opportunity to take on additional responsibilities to stretch their capabilities.
Create a succession plan. Plan to build a business that will outlive you. The best way to start is to standardize and memorialize, in writing, all recurring processes. Your long-term goal is to create an organization that can run without your day-to-day input. You’ll know you’ve achieved this when you can take a three-month vacation without having to check in daily.