I am often asked ‘What are the key skills of the successful SME owner manager?’ The owner manager is often in a very different place to that of a start-up or that of the director of a well-established large mature company. Start-ups require hands-on management, often with few people doing most of the work and who own the business and there may be external finance. In large companies, the directors need less day-to-day involvement but must focus on the long-term company vision and the required strategy to achieve it. SMEs fall somewhere in between and need leaders to manage the company creatively and with sound processes whilst at the same time setting the course for the ship to follow.
So what are the requirements for the owner manager? I would suggest five key ones:
1. Having a plan
The old adage of Benjamin Franklin (1706 -1790) a Founding Father of the USA that “If you fail to plan, you are planning to fail” may be hackneyed but is very true. The real importance of the plan is not so much the finished product (which is never finished anyway) but the processes that take place in preparing it.
A plan is a roadmap to success. It starts from the here and now and takes us towards a goal. For business this will inevitably include a financial goal but a cancer research charity will have curing cancer as the primary goal. The plan will spell out the journey in terms of sales, processes and operations, finances, resources, people, the market, risks, regulation, timelines etc. It will have a short summary and be easily understood. These days they can be summarised diagrammatically on one sheet of A4 (eg Business Model Canvas – a simple tool ).
2. A strong handle on the finances
To have a really strong handle on the finances of the business is fundamental. Without cash, a business will fail – irrespective of size (unless you are so big that the Government bails you out but that’s another story!).
It should be taken as read (but often isn’t!) that the business has timely financial information on its past performance (eg through quarterly management accounts). It also needs a financial forecast looking ahead showing actual performance compared to the forecast.
Cash is key and so a cash flow forecast is also needed as no business however profitable will survive if it has no cash because it is spending its cash on dividends (even if legal ones), acquisitions (which contributed to the collapse of the Royal Bank of Scotland and JJB Sports), R&D (the downfall of Imagination Technologies) or endless new cars for the directors (I have known of such in the past – but they went bust!).
3. Understanding the operations & processes
To know the mechanics of what the business does inside out so it operates efficiently and effectively (not the same) is fundamental. As a business grows it inevitably needs systems and processes. Efficient staff or machinery complete tasks in the least amount of time possible with the least amount of resources possible by utilising time-saving strategies. Staff effectiveness is a measure of the results from their actions. Staff who demonstrate effectiveness in the workplace help produce high-quality results.
KPIs need to be intelligently set – with as few as possible but then rigorously monitored.
4. A clear view of the market
To understand the firm’s market so it can compete successfully is key. “No man is an island entire of itself” so said the English metaphysical poet John Donne (1572-1631) and nor is any business. Understanding the competitive landscape to a business is fundamental, without knowing this a business cannot properly differentiate itself from the competition and also be aware of what the competition is up to!
Hugh Scanlon, a giant of the trade union movement during the turbulent 1970s was once famously ordered by the then prime minister, Harold Wilson to “get your tanks off my lawn”. We don’t want the competition putting their tanks on our lawn and so we need to be constantly developing and working on our market: defending it, developing it, growing it. Few SMEs can do without at least some professional marketing and branding support.
5. Supporting the team
Finally, the successful SME will be empowering the team by encouraging them and also challenging/supporting them appropriately (not just criticising them!) so they feel valued and motivated to work hard and believe in the company. This will in turn keep employees in the business.
One of the keys to this is sharing a common vision to which everyone can be aligned. Does everyone know what is the main thing (or things) that the business must do well to prosper? (For RyanAir it seems to be negative publicity!) To achieve the hopefully positive aim of your business, what is the particular role of each member of the team? These will vary enormously according to the person’s job but everyone must be allowed to do their job and infighting (which is different to creative tensions!) banned. A classic problem in many businesses is the sales team being focussed on sales activity (ie turnover) and not profitability. Time and again there are organisations where staff have contradictory objectives – this is especially true in complex ones.
Getting the balance of everything about right increases the likelihood of the SME succeeding immeasurably compared to being focused on just one area of the business. This is where the team really matters so the flourishing SME moves quickly from being run by one person (when it is unlikely to expand and grow) to be being run by a highly skilled, motivated and resourced team of great people.
One of the great joys for us at SME Strategies is to work with ambitious owner managers. Like all good strategic advisers we not only bring a wealth of business experience (including having made a fair share of mistakes and learnt from them) and the support of other experts but we are committed to helping owner managers develop the skillsets (above) to keep a number of equally important plates spinning! We roll up our sleeves when needed (which is fairly often) and get stuck into a business and can become part of the management team.