Entrepreneurs who start a business may face a challenging path. Nearly half fail within their first year, and roughly 65 percent make it their first two years. So, what sets those who survive and thrive apart from the rest? We asked some local experts for their advice on a variety of related topics, including planning ahead, rising above the plateau, finding qualified employees, and developing a culture that drives success.
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What should business owners consider when planning for growth, and how far ahead should they plan?
It’s all about relationships. Networking is how I’ve grown my business. We did a half-million dollars worth of business last year but I referred out over $1 million worth of business to my network. The best way to grow is through referrals.
People are built differently. Some people can have a big goal they’re shooting for and that motivates them. For other people, it will overwhelm them to have that big goal. Make a bunch of small goals that help you reach that big goal because at the end of the day when you’ve accomplished a couple things on your list, you’re going to feel better and be more productive.
I don’t think you should plan out further than a year. I always like doing a 30-day, six-month and one-year goal. It’s something that’s achievable. If you set a high goal, even if you crush it and do really well but fall short of your goal, you’ll feel like you failed.
One universal challenge of growing a business is balancing necessary short-term objectives and longer-term business growth strategies.
In the early stages of business development, I check myself often by asking, “Is this an immediate revenue- generating activity?” If the activity is not directly driving revenue, I’ve got to seriously consider whether it really makes sense to spend time, energy or money on it.
As you grow, you can start shifting focus to longer- term objectives. So, when you first start out, you’re really thinking week-to-week. As revenue shows some consistency, you can start thinking month to month, then quarter to quarter, then year to year.
When I’m talking to business owners, one of my first questions is, “What is your ultimate goal?” The reason I ask that is because in law school, you’re taught that the purpose of creating and growing a business is to make a profit, eventually sell it and then move on to the next business.
But business owners don’t always have a vision of where they want to end up. Then, they get to a point where they actually have a valuable business and people are asking if they want to sell it, expand it, merge, etc.
So, the biggest thing is that ultimate goal. Are you trying to create a business that is going to be generational, that your grandkids and great-grandkids are going to inherit? Is the purpose to make a large profit, sell it and move on to the next thing or to grow it, sell it and then retire? Those types of things are important to know at the outset. But, in my experience, most businesses don’t start out that way.
How far ahead should you be planning? The reality is, you should be doing it almost immediately and thinking about succession planning, too. I can help you get to where you’re going if you know where you ultimately want to end up.
I think a five-year and a 10-year plan are absolutely great to have, but flexibility is vital.
You have to pay attention to key performance indicators, both internal and external. I have seen businesses fail because the leaders don’t respond appropriately to a major disruption in their market segment, or to some internal red flags, because they’re diligently sticking to their five-year plan. Plan, but be flexible.
How important are culture and a clear mission statement to overall growth and success?
The culture of a business is important because that’s how you’re going to attract new business, investors and employees, and that’s how you’re going to keep them. You may just start small with family members, or it might just be one person or a married couple. But eventually you have to figure out your culture and what values are important to you and your business as you move forward to your ultimate goal. But, it’s hard to have a culture unless you know where you are headed.
To me, the mission statement is really just an affirmation of your culture. It’s so important that the mission statement be thoughtful and in line with the culture. But you can’t have a mission statement until you know what your culture is.
I have been an organizational consultant for more than 20 years, and have worked with many different organizations on mission statements. I have found that a mission statement is only as good as the culture that supports it. I have watched employees of a Fortune 500 client of mine - which had the mission statement, “Trust Permeates the Organization” - roll their eyes when I asked about how well their culture reflected that statement.
A mission statement is a way of organically translating your culture into a few words. But you can’t use a mission statement to force a culture into being something it isn’t. Put your culture first. Put your people first.
I think it is the most important thing. When you’re starting a business, especially a high-growth business, your first few employees are taking a risk working for a company that’s brand new, doesn’t have a proven track record, and may not even have revenue yet.
So, creating a culture they gravitate toward and that is designed to support them is absolutely critical. Without the security of stable revenue and profitability numbers, an attractive culture that exudes vision, confidence and excitement is really the only way to attract good talent.
As far as mission statements, I’d be hesitant to formalize that up front. In the early stages of a business, agility and adaptiveness are keys. The mission may change, so I’d wait until your business gets to a point where you can focus on long-term objectives.
However, I think day-to-day, you can foster the culture you want, not by putting words up on a wall but just by how you communicate, acknowledge success and express appreciation.
It is important but it’s not of the utmost importance. Every business should know what its identity is.
I think it’s all about networking out and helping other people, and I think a lot of people fall short of that. I’m from the Zig Ziglar school of, “You will get all you want in life if you help enough other people get what they want.” Meeting with people like [Ziglar motivational speaker and sales trainer] Chad Porter on a regular basis really helps me to keep my focus.
I quickly decided I did not want to be a jack of all trades and a master of none. I wanted to be a master of one and be the industry’s go-to person when it comes to energy efficiency. It’s taken some time but we’ve gotten there.
What benefits and obstacles to business growth do you see locally?
Labor force/talent pool is one. We have two positions open now, and are finding it challenging to recruit ideal candidates. It’s a little discouraging to see candidates who are clearly not the right fit applying for them.
With regard to Wilmington specifically, you’re not going to access the same talent pool as maybe a larger metro area that pulls in people from a lot of different areas.
However, one unique benefit to being in Wilmington is that we are such a tight-knit business community; it’s very easy to get networked in. So, you have access to mentorship, capital, partnerships and maybe even customers and employees.
There’s such a strong, active business community and there’s a big push to foster economic growth, so there’s a lot of assistance and willingness to help available to you.
There are a lot of college students who want to stay in Wilmington after they graduate. The obstacles businesses in Wilmington face is sorting through the overwhelming candidate pool, not just from this area but from all over the state, because Wilmington is a destination location. It’s looked at as a beach town, but we also are growing and have a lot more industry.
That’s the challenge - finding the right candidates in a pool of applicants. Then, when you find them, how do you keep them?
Wilmington is too small a town to pay for networking. All you have to do is offer to buy people lunch and then network. The benefit is, Wilmington isn’t that big. It’s easy to find those key people to help you achieve goals.
But it’s also easy to fall into having to pay to network. We started a group called All About Leads. We meet every other Tuesday at Moe’s, and it’s free. The idea is, I want everybody in that organization to know my kid’s names. I want to know their kid’s names.
Most importantly, find people that challenge you and have the qualities that you want.
I love Wilmington. I have lived here most of my life. All my children have grown up here and my parents live here. My husband is a native. So, when I say my partner, Pete DeVita, and I care about Wilmington’s business, we care deeply, because this is where our roots are and we want to see businesses grow and develop.
Wilmington is really only limited by its geography and its access to natural resources. Those two limitations require some foresight and some appropriate planning so that this area can support the future growth that I think is imminent.
I’m excited for what the future holds for Wilmington, especially in terms of small to mid-size businesses.
What are your tips for avoiding a plateau?
Set realistic goals.
Always have your “Open for Business” sign on. What I mean by that is, just because you’re on quota and you’ve hit the numbers you wanted to hit that month, don’t lose sight of that person you might meet in the coffee shop or gas station who could be a potential client. Just because you’re hitting your numbers this month doesn’t mean you will be next month.
Don’t be afraid of change. If you don’t take chances, chances are you’re going to hit that plateau.
As an applied psychologist, I understand there are people who will naturally tend to plateau and there are those less likely to. A person who is a disrupter is less likely to plateau because their preference is for change. Now, they’re also probably not going to have the same kind of business trajectory a planner would have.
It’s good to have both kinds in your business. I call that having a “gas” and a “brake.” You need a “gas pedal” and you need a “brake” in every business endeavor, because the “gas pedal” person or group is going “Yeah! Let’s go!” about everything, and the “brake” is saying, “Hey, whoa! Have we thought about how much that costs?”
If you have a tendency to plateau, plan for disruptions in your life because if you don’t, you will certainly plateau, and you might get really happy there. Then suddenly that plateau might start to sink like a sinkhole, or at least it may seem that way as your competition continues upward.
I recently read something that really resonated with me, “If it ain’t broken, try to improve it anyway.” I really like that and, while I never really thought about it that way, that is how I tend to run things.
I don’t look at things as being “checked-off” or “done.” I see them as more of in states of existence, and they’re going to change and evolve. The only way you can improve is through change, so everything has to change. Otherwise, you have settled for status quo.
The number-one tip is to have self-awareness. And the way to have self-awareness, in my experience, is to make sure you’re constantly seeking out other perspectives and seeking to know how you’re perceived in the marketplace by customers, competitors and prospective employees. You need to have people you trust provide you with this type of feedback.
Don’t be afraid to change. There’s a saying I use quite a bit with my clients, “The only people who like change are babies.” It’s hard to change, but you have to understand that change is necessary and you have to evolve your business with the times.
Otherwise, you’re going to end up like Blockbuster. Blockbuster had an opportunity years ago to purchase Netflix and they low-balled the owners of Netflix. And who’s laughing now? Blockbuster has gone the way of the dodo and Netflix is worth almost $100 billion.
What is your advice for hiring and retaining talent?
The previous mentality of business owners a decade ago was “Hey, I’ll just pay them more and that’s going to make my employees happy.” I see that less and less.
Now, I think work-life balance and culture are more important to people. Employees want to know how many hours they are going to spend at work and how those hours are going to treat them. The more talented the person, the more he or she is able to demand of their employer, and there are different ways to provide incentives and bonus structures, so you can get creative. But I think employees and potential recruits are looking at not just, How much money am I going to make? but How much of my free time am I going to give up to make it?
I think it goes back to culture. At KWIPPED, we chose to be downtown for cultural reasons. We feel the vibe and energy downtown offers aligns with our company’s vibe and energy. We chose an open and collaborative workspace so as not to put barriers between the transfers of energy. We regularly acknowledge each other through virtual high-fives. And we’re big on teams.
Retaining talent very much speaks to the culture. Recruiting talent is the same thing. If candidates get a taste of what it’s like to be there through the recruiting process, then you will attract and acquire good people.
Have a very good screening process in the beginning and don’t start your pay so high. Offer people bonuses. Give them something to work for. That is key. A dollar raise adds up to be a heck of a lot of money over the year, and you can lose productivity because that employee doesn’t have that bonus out there in front of them.
It starts with selection. I think it’s really important to use a broad and deep selection process for virtually everything you do. Most companies rely heavily on interviews, not understanding the mean validity index of interviews – the ability of even a trained interviewer or recruiter to hire the right candidate – is only 20 to 30 percent across the board. We can be easily swayed by someone in an interview, but those people might end up being poor performers or their skill sets might not be well-matched to the job.
It is as important to get good advice on this topic as it is to hire a good attorney or CPA. Make sure you have a skilled industrial-organizational psychologist assisting you to conduct a job analysis and design your hiring procedures so they comply with state and federal guidelines, and invest in hiring well-educated HR practitioners who will act as internal business partners to keep a healthy talent stream flowing into your company.
As a business’ staff grows, what legal and human resources guidelines should consider?
There are very defined transitions that take place when you go from, say, one to seven employees to 10 to 30, and then from 30 and up.
In anticipating growth, you really have to figure out who is capable of making that transition. Early on, every employee is a founder in the business, in a sense, and feels some ownership in its success. But as the business grows, individuals have to start giving up responsibility, and some have a harder time with that than others.
I think you also have to formalize your culture to be less fraternal. Early on, it’s important to be slightly lax. But as you grow and get more diverse, you have to ratchet up the professionalism a couple notches.
Defining process is important. For example, early on, we don’t really track vacation days; you just assume employees will not abuse that. But as you grow, it’s necessary to keep track so nobody feels there is an unfair advantage. We put these things in place as we intuitively sense we need to.
It’s so important to hire well-trained HR people as early as you can as your business grows.
I’m coaching a CFO right now whose company is wrestling with a big mess because they did not establish clear policies in the early stages. This is so common, but if they had, they could have avoided the problems they are dealing with today. If your company didn’t establish these policies early, then you need to hire that expertise at some point - and give your HR policies a thorough review.
It’s not a big investment, it’s important, and it can save your company a huge headache later.
You really have to be cognizant of the labor laws because they change, and you’re subject to more obligations as you grow and increase head count. The biggest thing is to not be complacent about it and understand that there are thresholds and get to your service professionals – your HR resources, your lawyers, your insurance people – to make sure you’re covered before you make the leap.
When preparing for growth, do you think it’s better to “think big” or embrace the niche market?
I think you have to do both. You have to let your story drive your marketing, but first you have to let your customer drive your story.
Our brokerage just sold an amazing little women’s shop in Calabash called Coco & Co. that has tripled its sales in the last three years. The original owner, Rebecca Wallace, did that because she really listened and learned who her customer was and she created, out of basically nothing, a shopping destination.
We were able to sell this business to one of Rebecca’s very good friends, Jenna Cox. Rebecca is a design expert who listened to the customer and built this tremendous foundation. Jenna is a marketing expert who is already thinking big and developing that brand. So, you see how those two things work together.
You always need to think big. “Think Big and Kick Ass” by Donald Trump - that’s one of my favorite books. I’m a big proponent of thinking big.
I don’t think one is better than the other; they’re just different. You’re going to have choices to make and you’re going to move in different directions based on which market you’re looking at. A challenge for clients or businesses that think too big is they end up drinking out of a fire hose; they end up getting overwhelmed. The niche market may appear a little easier to get your hands around but at the same time the niche market has different challenges, which can be even more limiting.
If you don’t have a goal, it’s not going to matter whether you think big or stay in a niche market. Because what’s going to happen is, you’re going to be reactive instead of proactive. You’re going to be on the bleeding edge, not the cutting edge.
Identifying and focusing on a particular niche is a smart tactical activity, but on a broader level I believe it is crucial to think big. Maybe a different way of thinking about that is, don’t put any limitations on who or what you have the potential to become.
You’re not going to know what your business is going to evolve into. You may start off as a dog-walking business in Wilmington, and you may build a franchise and become a national company. You may leverage that into becoming a pet supply store, and you may leverage that into becoming a veterinary practice.
If you don’t think big or at least remove any limitations to your creative imagination, you will miss opportunity.
How much should you focus on your competition?
I think it’s wise to focus on your competition, at least to have an awareness of their pricing or how they’re advertising. What does their customer base look like? Has it changed?
But I think this scorched earth idea or thinking of competition as a boxing match isn’t there anymore. In most cases, there is enough market share for everyone to kind of coexist. It just depends on what they have set as their main business goal, which may not be solely dependent on the market.
I work with other business owners who, when they’re out there in their niche and someone wants them to do something else, they see dollar signs and just do it. After 10 years in the home improvement business, I will say that when you step out of that box, it usually ends up being nothing but nightmares. Stick to what you’re good at.
We take a whole-house approach. We look at everything from the crawl space to the attic and make recommendations on how to make a home more energy-efficient, anything to save people money on their energy bill.
I try to look for people who are more successful than me and then put them in my network because it will build me up and make me perform at a higher level.
I don’t get distracted by what other people are doing. I feel like you should do you. You can get wrapped around the axle when you spend time focusing on what your competition is doing.
You can learn from what your competition is doing. You can do it better, maybe. Certainly, don’t have blinders on, but if you’re always trying to be your competition, then you’re always going to come in second place.
The very first thing you should do is change the word “competition” to “validation.” If you have other companies out there doing what you’re doing, they are validating what you’re doing. If it’s inundated with competition, that means there’s plenty of information out there to inform decisions.
In general, the fewer competitors out there, the more blue-ocean it is and the more innovation and risk are required to make it work. So, I think competition is good. If you find yourself in a business or industry where you don’t have competition, that, to me, is scary.
How can collaboration help you grow your business?
Collaboration is key. I am constantly looking for ways to connect with other entrepreneurs, and anyone who can help our clients. They are the heroes of our business story. It is always about them, so I will reach out to anyone who can make their story better.
For instance, we have great working relationships with lenders, CPAs, attorneys and consultants in the Southeast, and even with other business brokers across the U.S., because connecting those professionals to our clients is how we get business done. Putting our buyers and sellers first is how we help them navigate their next steps.
I am a big advocate of an environment that fosters peer-to-peer advice, whether it be a board you sit on or one you pay to be on or just attending networking events.
It’s human nature to condition your brain to think that fewer possibilities exist than what really do. You just think you know it and then all the sudden, you start talking to other people and they have a completely different perception of it.
You realize you don’t know it all; there are other angles, ideas and possibilities out there.
Groups where you bring in business owners from different industries and meet together are a great tool, in my experience. These groups can allow you to get different perspectives from successful people who aren’t in your industry so you don’t need to worry about them stealing your ideas. It may be that they’ve thought about things you haven’t thought about or have already dealt with issues you are currently dealing with.
It’s the number-one thing you can do. Above everything else. That’s the number-one thing you can do.