5 Lessons for Succeeding as a Small Business Owner

Welcome to Buckeye Interactive’s new column on TheMetropreneur.com. I am Brad Griffith, President and Founder of Buckeye Interactive. I am a developer, a web strategist, a business owner, a husband and a father, and each role plays an important part in how I run my business. The lessons I learn every day at Buckeye Interactive are shaped by these roles. I haven’t perfected the art of running a small business, of course, but we all have valuable lessons to share.

Let’s jump right in.

1. Running your own business gives you control of your success… or failure.

Is starting a business risky? Absolutely. But how risky is it to depend upon one person or company for all your income? I started Buckeye Interactive in 2009, right in the middle of the worst economy my generation has seen. There’s no better time to take control of your career by starting your own business. Yes, that’s right, a down economy is a great time to start a business.

For just over four years, I have had unprecedented control over my responsibilities, income, schedule and happiness. If I want to make more money, I need to work harder and smarter. If I want to go with my daughter to her swimming lessons, I can make time in my schedule. And if I don’t want to take on a project that sounds boring or a client who has been uncooperative in the sales process, I can make that choice. While those choices may sound glamorous, each has a downside. Making more money usually requires longer hours. Time with family requires time away from growing the business. And if we were to only take on our ideal projects and clients, we would be hurting for work. But in the end, I would much rather be empowered and in control of these decisions, rather than simply a cog in the wheel of a larger business or organization.

2. Set goals early and often. Measure progress constantly.

So you’re a talented professional, and you decide to start a business to have more control and, in theory, keep more of the revenue you generate from your billable time. It’s critical to know what you’re trying to accomplish. Include both personal and professional goals. In my opinion, working hard is of little value if it doesn’t ultimately mean an improvement in the quality and amount of time I get to spend with my family. Some of my goals when I started Buckeye Interactive included:

  • • Take on a wider variety of projects to learn more technologies
  • • Become a well-respected community resource in web strategy and engineering
  • • Double my net income in five years
  • • Employ two people within five years
  • • Work four days/week within five years, leaving an extra day for family

I am ahead of pace on some goals and tracking a bit behind schedule on others.

We also have several company goals that we track closely. We set up reporting for all of the metrics we can, including detailed time-tracking reporting, project profitability, retainer client pace and critical business metrics, then we discuss results in weekly team meetings. If there is a metric that’s important to your success, collect data to measure your performance, and automate a dashboard or report to keep your team focused.

3. Plan, but don’t write a business plan.

So many entrepreneurs are convinced they need thorough, written business plans to seek investors, apply for a loan or even before they register a business with the state. None of these are true. I encourage entrepreneurs to plan ahead–especially financially–for the best and worst case scenarios, and to know what elements of the plan are the most sensitive. Some examples include:

  • • The number of new clients you land each month
  • • Your average sales
  • • Percentage of sales from existing clients vs. new sales
  • • Gross margin–revenue minus cost of goods sold
  • • Major cost drivers, i.e. payroll, rent, inventory, technology, advertising, etc.

If you know what factors are most important to the success or failure of your business, and you have documented your key assumptions, you are in better shape than most people with a written business plan.

4. Know your finances forwards and backwards.

Failing to understand your finances is the fastest way to go out of business. Particularly if you don’t have enough cash on hand, you will find yourself upsetting one or more of the following: suppliers, employees, family members, customers, investors, lenders or the IRS! I believe it is vitally important to my personal and professional integrity that I pay all our bills on time. I am the last one to get paid after bills, payroll, loan payments, taxes, etc.

Just as you may keep a savings or reserve fund at home of three to six months of expenses, you should do the same at work. Know your monthly burn rate–how much total money you spend in a month regardless of income–and your projected income over the next three to six months. If you will spend $10,000/month, and you anticipate $60,000 in sales over the next six months, then you will break even. Don’t be too optimistic. Keep in mind your close rate for sales–the percentage of sales opportunities that will turn into actual paying customers, payment terms–how long it takes you to collect from customers, and unexpected expenses. It’s all too easy to estimate $60,000 in sales while neglecting to factor in a 50% close rate, 60-day payment terms and an annual insurance payment coming up in a few months. All of a sudden, your $60,000 in revenue over the next six months is now $30,000 over eight months, and your expenses top $62,000. That’s not a fun situation. You had better get a line of credit and maintain a strong relationship with your banker before that happens!

5. Great employees are critical to successful growth. But having employees is a lot of work.

The most important factor for the success of our business is our team. Recruiting and retaining top-notch technical, creative and strategic professionals is no small task. Due to our outstanding employees, our clients interact with highly-skilled and well-educated team members who share a common vision for our company and our clients’ success. If we used contractors to grow our capacity, the consistent quality of our work and/or our interactions with clients would be nearly impossible to maintain. Without my team, my personal income would completely stop while I go on vacation, and a website outage during my daughter’s ballet class would just have to wait until I got back to the office. At least the latter is not a viable option for a professional company.

Aside from payroll processing and added liability and regulations, adding employees to your team also requires a shift in your managerial focus. No longer will you focus on just your clients and your work. Now, writing policies and procedures, designing compensation and benefit plans, mentoring and coaching, and catering to the emotional, personal and professional needs of each individual team member will be a part of your daily routine.

When I set a goal to employ two people, I had little appreciation for the uniqueness of each person, including motivations, ideal work environment, communication styles and work ethic. I have had employees who want concrete, quantified performance metrics and employees who need regular one-on-one validation and reinforcement of their qualitative value to the company. I have had employees who thrive on conflict and those who can’t stand when there’s tension in the room between others. I’ve been told that money is the only motivator for one employee, but that money doesn’t motivate at all for another, and instead having interesting work that contributes to the team is the only important factor. My job is not to develop outstanding web applications for our clients. My job is now to cultivate the environment, processes and culture that facilitate happiness, productivity and success for my team. I lead the way, but they make the magic happen.

How does this all relate to web and mobile application design, development and strategy? Only if we know how to run a successful business can we advise our clients on what we can do to make their businesses more successful. We are marketing, design and development experts, but it’s when we mix in our business expertise that we can become strategic partners for our clients.

In the coming months, you will hear from our outstanding team members. I am proud to be a part of such a talented team of individuals who work together to craft some of the most impressive digital solutions I’ve seen. You can expect tips on design, web development, mobile apps, online marketing and advertising, and more.

We owe it to our community to share our lessons learned with each other to grow more successful small businesses. I would encourage you to contribute one of your lessons learned in the comments to continue the conversation and to help other businesses succeed.