Essential Management Principles for Every Small Business

I have read throughout my career, more than 10,000 different items and lists of how anyone can succeed with a small business, whether an independent or a franchise. Many well-intentioned and intelligent consultants I have met with professionals believe that a great idea with a great marketing plan and superior desire can make anyone successful. Ask yourself a favor and tell the next person thrown this nonsense that they are absolutely wrong!

The success or failure of the vast majority of all small businesses have little to do with the desire, the marketing plan or idea that has created the company. While these three elements must be present in every successful business, strong management principles essential to enable small businesses to thrive and succeed. Every successful business, whether small, medium or large company, uses the same system managers. The size of the firm determines the managers who use and sophistication of the principle. As an example, a small company is usually informal and perhaps even the hiring of employees unwritten guidelines. A medium sized company has a law passed with broad employee manual employee hiring guidelines as a separate section. A large global business department has written a number of manual workers in various languages with the hiring of employees on the basis of legal guidance and social issues in each country. However, common sense management principal that all companies should have a fair, consistent and enforceable employment program must be used by each company.

As I have spent most of my career with the small and medium businesses, here is a simple and select group of management principles that every small and medium company must follow to ensure success and profitability:

A good department timely monthly financial statements provides the basis for all management decisions. Any employer or officer who believes only in his “gut” feel, is running what will be a failure. Whatever the size of the company, each owner and chief executive must have valid data to confirm the decisions of his “gut” tells them to do. Their financial statements are a factual record of the history of your company and we should all clearly understand our history not to repeat past mistakes. How can you determine if its recent marketing campaign is a success unless they see and evaluate the financial results? We’ve all heard stories about the marketing campaign that led to many new customers to the company, but killed the company because the advertising spending is greater than the profit margin on new sales. An entrepreneur does not need a degree in accounting, but should know enough to understand and participate in the review of financial information.

Running a small business based on the cash in the business checking account also violates this principle of management and severely inhibit the growth and success of the company. Unless you want to remain a “mom and pop” business forever, good information is a requirement.

Standardize and automate all routine tasks. Have you ever noticed that most of the successful business people have a routine for most of their daily duties? Have staff meetings at the same time want all the reports in a specific format, you want all the PCs and software to be the same in the office and you want the external calls to be answered with a greeting. By standardizing all the routine, successful business people do not have to think or operate these functions. Can focus their time and efforts in managing unusual situations.

The same principle applies to your business. I personally know a company that 10 years ago, had a credit department with 15 employees and 3 managers that have made many decisions every day. Today, the company has doubled its sales and now has a credit department that consists of 5 employees, a manager and a set of software that manages electronic payments and send emails and reminder letters to customers.

Review and analyze the stock before the Statement of Profit and Loss. Monthly P & G tells you whether you were successful last month of its operations, but its balance sheet tells you what shape your business and what you can do in the future. I’ve seen a company that doubled sales one year and closed its doors less than six months later. I have also seen a company that went bankrupt despite the fact that their P & L’s showed reasonable success. Taking stock of the company shows how the company uses its daily operations to finance long-term success of the company. Analysis of Fixed Assets, Accounts Receivable, Long Term Debt and Retained Earnings will give us our long-term undertaking. Not as exciting as the analysis of our new customers and product offerings, but it is necessary for the long term.

Planning and Budgeting business to help reduce the daily activity of fire and seizing opportunities. There are an unusual number of small and medium enterprises that do not work hard, either annual or strategic planning and budgeting. Most are too busy fighting fires and struggling to keep up with the business daily. No time for planning and budgeting in their hours of work 80 weeks. We’ve all been in this position. The point here is unfortunate that the fire of long weeks and never slow down or cease until a little planning and budgeting is in place. The need for planning and budgeting becomes more intense as a business grows due to their inability to “manage by walking.” The planning and budgeting you can start simply and naturally increase as the company expands. This principle of management will allow all employees to see the vision and approach of the company will begin to reduce the daily fires that pop-up.

The greatest advantage of planning and budgeting is that it allows each business owner to quickly and easily evaluate how an unexpected opportunity could be of benefit to the company. I have spoken with many business owners who stumbled with a sudden and potentially large opportunity, as a competitor for the sale, a good provider who need a partner, a potential new client, which immediately doubled sales or a potential new product requiring a new set of tools and equipment. These opportunities occur all the business owners on a regular basis, but many also disappear quickly. Companies that have a good plan and budget in place to assess these opportunities can quickly and easily to determine if the new opportunity fits with the company long term. These companies also have the ability to quickly approach a bank with sound financial proforma additional capital if needed.

This is not a sale unless they collect. Most small and medium companies spend too much time in the sales process and very little time with the collection process. Most companies are willing to pay a salary of six figures to a vendor that can generate huge sales of the company, while making an entry-level accounting employee in charge of collection with little or no supervision and procedures. The company takes more and more money to increase sales, while an employee of accounting, no customer service experience to pick fights. The sales department in every business should have a part in the process of collection and the company must have a strong, fair and customer-oriented collection process to make sure it really means a sale of money in the bank.

This process should begin before the sale. Collecting information in advance to determine if the potential customer is able to pay and ensuring the potential customer clearly understands the conditions of credit and demand for payment of benefit to all parties. All good potential customers will appreciate this process because we all have to cope with the quality of the companies. I have never found any company not willing to pay for quality products and services when they understand all the terms and conditions.

The credit department must have a good set of processes and procedures to ensure that the payment process is smooth and efficient. Employee turnover of providers, cash and other unexpected stop or slow down the payment process. The credit department shall, in a customer-oriented fashion, work to keep our cash flow.

Run the business like their grandchildren will take over. Each business is a living and vibrant organization that has many similarities to our children. Her business began as a child learns to crawl and eventually walk. Never make a decision that our son does not take into account the child’s future and we should not do with our business either.

Working with a supplier that has a lower quality but cheaper price can be a great solution to short-term cash for our company but finally run off to destroy our business and our customers. How many times a company has lost all its records, and decided that it could not pay the backup computer system or a fire alarm in your store? Have you hired an employee who had before taking a drug test? Even once jumped to the possibility of hiring a salesperson from a competitor, because I thought it would be able to achieve over many customers. Unfortunately, cost too much and has not made more of an asset to all paying customers. There is no such thing as a good shortcut to the directors and management for efficient long-term success of your organization.

Recruit the best and brightest. How many of us have engaged our friends, the seller thought was a bargain, books about the best during the interview the manager or what we thought was more like us? Many small and medium enterprises which are filled with employees who were hired for those reasons, because small companies can not pay high salaries and all benefit packages that large companies can afford. We tend to recruit the best we think we can get.

We must set our expectations higher and the use of the planning process to find employees. The first issue is that your company must have a good annual plan and a plan for 5 years where the business logic will be. Your company can then determine which employees will be required during this period of 5 years. Now that we’ve defined what employees and what responsibilities are needed, we must find people who meet these requirements and that not only we can afford today.

I try to hire people who are smarter and have more experience than me in the specific position. Any owner who believes he is the smartest person in all areas will never be able to recruit the right people. A company that will never be greater than its weakest employee and therefore you should always hire the best.

The last company in which he established with a plan showing that they would need in their first 5 years CPA. After 3 years I was told that the CPA hired and very surprised because this individual had other employment opportunities with large national companies that offer great benefits. However, this small company can provide professional growth and accountability is not available in the large enterprise. The vast majority of good employees prefer to have a more responsible position with a child with a great future unless a responsible position with a large company.

You can grow the business. Cash is king in business and those who recognize this fact will succeed and prosper. I’ve seen more companies that grow too fast without good business plan and are forced to close or find a buyer quickly. Companies struggling to watch his daily cash and doing what they need to keep the doors open. However, companies that doubled their sales see huge profits in its monthly financial statements and getting caught up in the excitement and success. They see their accounts receivable double, double its inventory, which needs to purchase more products to their employees because they have done the double over these sales and suddenly are unable to make payroll this week because they have no money cash in your checking account. His company grew, literally, outside of himself that many small businesses and medium businesses are struggling to understand until you have lived through it.

The culture of each company is as important as its mission. As mentioned earlier, a company is a living and breathing. The culture of each company is as important to the overall success of the company and the products and services offered. The owner of the company can not delegate this function and must be involved. There is no right or wrong here as the corporate culture is a reflection of quality, morality and ethics of its owner. The success of an enterprise culture is a constantly evolving, but is based on the growth and expansion of the organization. Changing a company’s culture is a sure way of closing a business.

A company with a strict dress code, time clocks that are strictly enforced and many of the processes and procedures is not better than any other company dress code, there are few processes, and telecommuting for employees. The only difference is the type of workers that remain and how we do business.

As competitors are essential for its long-term success. You can stop laughing because this is really a fact that every successful company understands. This is an unusual concept, but businessmen and women all hug. Competition is a wonderful concept in every free market economy and the quality of competition makes us better. Promote the quality of the competitors that come with quality improvement, quality products and services and ensure that we operate a quality customer focused. We have all seen until the spring of companies offering a 50% reduction in price for a cheap cut of our products. Our drop in sales and spend time and effort outside of our core business to pursue this. To stay in business for a short period of time and nothing more than meet our customers that cause the industry. Promote the quality of the competitors towards the greatness of us all and there is not much space in all industries to many organizations.

Outsourcing reduces costs and improves your weaknesses. Many people hear the jokes about language issues in the large company call centers in India or the Philippines and say to themselves than ever that mistake. However, it could be a situation that is not really an error. A good IT program in the U.S. can cost more than $ 100,000 a year on payroll taxes, benefits, etc. This employee in India with the same intelligence, skills and experience can cost as little as $ 30,000 a year.

The management principle is that we should all concentrate on our strengths and outsource everything else whenever possible. No person think twice about using a tax accountant do our taxes out of state and federal. This is a technical area that is constantly changing. Most of us also have an outside legal firm. Why limit the use of outsourcing mainly to those two areas? Today, there are professionals on the payroll of companies, employees leasing companies, credit and collection business, computer and web programming companies and marketing firms. These companies work with many business organizations, stay on top of industry best practices and stay on top of technical developments in their area of expertise.

The only area of any company I recommend outsourcing is the area that is crucial to the success of your business. Never allow the core of its success to get out of your control. For example, if your company has a marketing plan or a proprietary database of customers or an engineering or a production process that is key to their success, do not leave it outside their control.