Fundamental Leadership Skills

As a small business owner and entrepreneur, you need to rely on yourself to set the example and tone for your business. Your vision and leadership determine the success of your business, so developing good leadership skills will benefit not only you, but your employees and your customers as well. And in these challenging times, being a successful leader will show future generations what is necessary to endure and thrive.

Although leadership styles vary, there are some fundamental skills that apply to all good leaders:

1) Have the ability to develop a vision and inspire others

2) Set clear goals, stay focused and communicate well

3) Give AND receive feedback

4) Recognize strengths and weaknesses in themselves, as well as team members

5) Know when to ask for outside help

6) Act with honesty and integrity

7) Be committed and accountable for their actions

8) Be able to effectively execute a strategy or plan

The first step in becoming a better leader is taking stock in your current leadership skills. What are you good at? What areas could you improve upon? Look at each day as a new opportunity to try something new, inspire others or reinforce a healthy habit.

Leaders inspire others with their actions, so be sure your actions are aligned with your vision, goals and values. This is called "intentional leadership". By keeping to your core ideals, you will greatly increase the chance of creating the business you really want.

How to Become a Better Listener

Has someone ever said to you, "Hey, did you hear me?" What they are really asking is, "Hey, are you listening to me?" Hearing is the physical act of sensing noises and tones. Listening is the art of hearing something with thoughtful attention. Hearing is passive; listening is active. One takes a great deal more effort than the other and requires conscious action on your part.

It is estimated that the average person uses only 1/4 of their listening capacity. Listening, like running, takes a lot of energy, so you have to work on building up your listening stamina. The more you practice, the better your listening skills will become and the more you will learn in the process.

The great news is that you have opportunities every day to work on your listening skills. Customers, employees, and family members are a just a few people we interact with on a daily basis. Relationships with these people, and others in our lives, can be greatly improved if we focus on really listening and understanding what they are saying. All too often, we rush to judgement and assume we know what the speaker means, which can lead to frustration and disappointment on both sides of the conversation. If we listen with an open mind, however, we are promoting cooperation and sharing of ideas, which leads to even better communication.

It also fulfills a basic human need of feeling acknowledged and understood. Everyone wants to know that they matter - so let others know you care by taking the time to listen to what they have to say.

To help improve your listening skills, practice the Four R’s of Effective Listening:

Respect - Understand that their opinions are important to them; clear your mind; do not prejudge.

Real time - Show you are interested in them and their situation; listen actively; focus on what they are saying; hold off from forming questions or opinions.

Relate - Understand and identify with their perspective; be empathetic; respond with affirmations, such as "I see" and "I understand".

Reflect - Ask questions to ensure you accurately perceive what is being said. Seek clarification where there is confusion, and identify true issues, feelings and thoughts.

The Importance of Trustworthiness

Credibility is the foundation of all successful businesses and it takes time and effort to build trust and credibility with your customers, vendors and business partners.  Customers want to know that they can rely on the products and services they purchase, vendors want to know they can count on your business to pay its bills on time and business partners want to know they can build solid, long-term relationships with you.

Like respect, credibility has to be earned.  It doesn't happen overnight and if you don't spend time maintaining that trust, your business can be vulnerable to losing customers to competitors.  Here are several great ways to build trustworthiness in your business and brand:

Be a Great Communicator

Your brand is special and unique.  You need to be able communicate your vision and brand message to your customers through your sales and marketing activities.  Be sure you communicate clearly and often so that customers are reminded what sets you apart from the competition.  Also ask customers for feedback, collect and share testimonials and use this information to improve your business.

Be sure to communicate your vision with employees and others involved in the operations of your business as well.  Make sure they feel a part of team, acknowledge their efforts and listen to their ideas and concerns.  You will gain invaluable insight if you practice this daily.

Follow Through

In order to build trust, you must practice what you preach.  Above all, this means being honest and trustworthy in all of your dealings with customers, vendors, and employees.  Make sure your actions align with your vision and don't promise more than you can deliver.  Let your customers know they are your highest priority and address their concerns or issues promptly.  The best way to lose a customer is to fail to meet their expectations.  

Stay Objective

Small business owners are passionate about their brand and their business.  However, don't let enthusiasm cloud your judgment when it comes to running your business.  Reach out to team members and advisors to get objective feedback and consider it carefully before making major decisions.  Learn to disconnect from the daily grind by taking time for quiet reflection on a regular basis - you will be surprised how much easier decisions become when your mind is clear.

Why Budgets are Key to Business Success

Most people would not set out on a long road trip without a map to help them get where they want to go and to navigate the obstacles along the way. Just like a road trip, your business needs a map to ensure you get to where you want to be. That financial map is called a budget.

Budgets are typically prepared ahead of time, so you have time to plan for upcoming events. Late fall is the perfect time to budget for the upcoming new year, as it gives you several months to prepare your budget, as well as reflect on what has already transpired for the current year. In order to prepare a useful budget, you not only need to anticipate the future, you need to review and reflect on the past to accurately forecast for the coming year. Looking at your current situation and understanding the business environment will help you better predict what the next year will look like.

Creating a budget does not need to be difficult. The hardest part is getting started. Once you have an initial budget, you can use that budget as a template for future budgets, which will save you time and effort. You will also be able to use your budget as a guide to judge how well your business is performing and if any adjustments need to be made during the year.  

Here are just some of the many benefits of budgeting:

• It allows you to anticipate future events and plan accordingly

• It allows you to grow and expand your business

• It helps you understand your spending habits and holds you accountable

• Because cash flow normally has peaks and valleys during the year, it allows you to ensure you have enough money throughout the year and avoid cash shortfalls

• It protects your business from failure due to lack of cash flow (one of the main reasons businesses fail)

• It allows you to determine borrowing needs and capacity to pay it back

• It helps you judge the effectiveness of marketing efforts

• It helps you determine proper staffing levels, employee compensation and benefits capacity

If budgets have not been on your to-do list, you are not alone. According to a recent survey by Clutch, 74% of small businesses with 10 or less employees did not have a formal budget. For those small businesses who do have a budget, however, statistics show that over 60% are able to meet or exceed their profitability targets, proving that having a budget can help your bottom line.

In order to successfully stay within budget, you need to review the budget frequently. The longer the span between reviews (i.e. quarterly vs monthly), the more likely you are to go over budget and the longer it can take to get back on track. Once established, your budget is another tool to help your business succeed and grow in an increasingly challenging business environment.

Getting a Handle on Cash Flow

Positive cash flow is one of the most critical components in managing a business, yet many business owners struggle to manage their cash. Most businesses fail not because the business isn’t profitable, but because they fail to manage their cash effectively and essentially run out of operating capital.

In tracking cash flow, business owners rely too often on looking just at their bank balance, rather than using tools such as financial statements, budgets and forecasts to help them anticipate the ebbs and flows of their cash cycle. Careful planning can help businesses maintain a healthy cash flow, as well as minimize the need to use short term financing, which often comes with hefty finance charges.

Although the Balance Sheet and Income Statement are helpful reports, they don’t show the whole picture when it come to cash flow. The Balance Sheet shows a snapshot of your cash position and the Income Statement shows the profitability of your business, which contrary to common belief, is NOT the same as cash in the bank. Oftentimes, the financial reports are also prepared on an accrual basis, and not cash basis, which can cause further confusion if you are not aware of the timing differences between accrual and cash basis.

A third financial report, called the Cash Flow Statement, can help you understand your cash flow better and assist you in tracking where you cash is coming from and where it goes each month. The Cash Flow statement shows not only sources of cash from operations and cash used for expenses, but also non-operating cash sources and uses, such as loans, fixed asset purchases and owner contributions and distributions. These non-operating items can significantly impact your cash balance, so it is vital that you understand and plan for non-operational cash activities.

Most accounting programs, including QuickBooks, have a Cash Flow Statement available as part of their financial reports. Begin by familiarizing yourself with this report, and review it monthly to better understand how your business cash flows. Once you know your cash flow cycle, you can implement steps to better manage cash, such as setting up and following budgets, improving billing and collection procedures, and negotiating better terms with vendors.