3 Key Points in this Episode:
- The top-down approach to leadership is all wrong.
- Leaders must start with a vision for the business.
- Establishing standards for the business is essential to creating a foundation for your great business.
In today’s episode, I talk about the importance of developing your leadership abilities and making leadership the foundation of a great business.
If you want to build something that lasts you must start with a solid foundation. When building a home, the foundation is the first thing that is built. Without a solid foundation, everything else that is built will fall apart quickly under the slightest bit of pressure. On the other hand, if the foundation is strong the building can withstand almost anything.
What is the foundation of a great business?
I believe that leadership is the solid foundation that a great business is built upon.
To be a leader and establish a solid foundation to build your great business upon, you need to first take a moment and do a personal assessment.
If you are unable to be a leader personally, in your home, your family, your social network, and your community, you will not be able to be a leader in your business. If there is an area in your personal life, that could use some work, now is the time to address it.
Building a great business and becoming a leader can, and most likely will, all be undone by ignoring any personal problems that you may have. You must get your personal affairs in order before you begin the process of establishing your leadership foundation for your business.
The Role of the Leader
When you think about the structure of the typical business the leader is always at the top.
In fact, it appears like a triangle, with a solid base of employees at the bottom providing stability to the whole structure. As you move upward within the triangle you have middle management and above, at the point of the triangle, sits the leader, sitting at the top, making decisions and telling the base WHAT needs to be done.
Before you started your own business you probably worked for a business that had this kind of structure. Perhaps part of the motivation to start your own business was that you wanted to be the person at the top. Wanting to be a leader is admirable but what kind of leader you become is critical to the success of your business.
In a great business, I believe that the top-down structure is all wrong. In a great business, the leader is the very foundation of the business, not the employees.
In that sense, the leader is at the bottom, the leader is what provides the stability to the whole structure. This translates into a monumental task for the leader because usually, it’s one person – YOU.
This can be even more challenging if you are the only person in your business because not only do you need to be the leader, you have to do all the other jobs as well.
In every great business, regardless if you are a business of one or you have employees, the leader not only decides WHAT needs to be done but also HOW it should be done. Beyond the WHAT and the HOW is the WHY!
The reason that we call leadership the foundation of a great business is that it all starts with you, the owner, the leader!
To the extent that you lead is the first determining factor in your business becoming great. Deciding and communicating WHY, WHAT, WHO, HOW, and WHEN is critical to success.
Creating a Vision
It all starts with a vision, a thought that will not go away.
You may have a picture in your head of what your business will look like and what it will feel like when it’s done, that is called vision.
If you don’t, now is the time to start dreaming; to build a mental image of what your business will become.
The question then becomes whether that vision aligns with the definition of a great business?
For your business to be a great business it must be a business that produces predictable results, operates independently of its owner, scales, and can be sold for a profit.
Only if these fundamentals are in place will you build a business that will provide for your family and give you flexibility and freedom instead of turning into a nightmare.
Your vision must be of the business, several years from now, who it will serve, how will it operate, what promises it will deliver on, what difference it will make in the lives of its stakeholders, your customers, your employees, your suppliers, your lenders, your investors, how big will it be, how much revenue it will create, and who will ultimately want to acquire or buy your business if you choose to sell it.
Your vision is the first part of your leadership foundation.
It represents the business model that you will create that will define your every decision as you build your great business.
How do you develop your vision?
These are the steps to develop a vision for your business. If you follow these steps in order you will have a vision that aligns with the definition of a great business.
Step 1 – What great need will your business address?
This is probably the most important question to answer because without addressing a great need it is doubtful that you will be successful in building a great business.
Linger in answering this question, meditate on it, when you think you have answered it, test your idea with trusted advisors and even a sample size of your potential customer base.
The answer to this question is always rooted in the WHY behind WHAT, WHO, HOW, and WHEN your business will do what it is created to do.
If you are feeling totally lost right now and don’t know where to start I would like to share a very specific thing you can do to help you uncover the all-important great need.
Go to several potential customers of your service and ask them what irritates them and what they love about doing business with one of your competitors.
You can word it like this, “Hi Sally, thanks for taking a minute to chat. I am working on my business and I know that you have purchased the kinds of services I plan on offering. Tell me, what did you absolutely love about the service you received and what bothered you?”
Notice how I did not bring up the name of the competitor. This is very important. You are just after the information and don’t want to risk tainting the potential relationship with this future customer by running a competitor down. It’s just not professional.
Step 2 – What business structure or model will your business use?
As a service-based business, you have some options.
Are you going to go to the customer’s location and perform interior or exterior work?
Will the customer come to your place of business or will it be a combination of both?
Will you provide physical or digital products as part of your service or will you only be providing a service?
There are many more questions to ask and answer but what I am trying to get you to do is describe your business and what it will do.
Step 3 – What guaranteed promises will the business deliver on?
How quickly will you respond to customer’s inquiries? Will you use and sell the best quality products or the cheapest products? When you make an appointment with a customer will you guarantee to be on time? Once you give a price, assuming the customer doesn’t change the scope of work, will you guarantee the price? Once the work is complete or the product is delivered, what satisfaction guarantees are in place? What kind of warranty will there be?
The promises you make to your customer are going to be an integral part of your brand. We will discuss this in more detail later, but for now, as you are building the foundation of your business, you as the leader must have an idea of what promises your great business intends on delivering to your customers.
Step 4 – How will you address the needs of your stakeholders?
What needs do your customers have? How will you address them?
What needs do your employees have? How will you address them?
What needs do your suppliers have? How will you address them?
What needs do your lenders have? How will you address them?
What needs do your investors have? How will you address them?
Remember that a great business serves all its stakeholders, a great leader of a great business understands that each stakeholder is looking to the business to provide a consistent result that is designed to meet their individual needs. Only when you consistently address all the stakeholder’s needs will your business achieve remarkable results.
Step 5 – How big will your business need to be and how much revenue will it need to create?
How much revenue will need to be earned, what will your sales, costs, gross profit, and net profit be at your first location? When you start to scale, how will growth change those metrics? How big is big enough?
You may resist wanting to establish any numbers at this early stage. There are so many unknowns that will affect these financial numbers. The very nature of a great business is that it grows and can be scaled so you may wonder, “why put any numbers down at all since things will constantly change going forward?”
The reason that I believe you should use your power of discernment and try to document what you do know about the financial needs of your business is because you will either surprise yourself with how much you do understand, or you will uncover that there is a great deal of work to be done to understand if this business is financially viable.
Step 6 – Who will buy your business if you choose to sell one day?
Will it be a competitor? Will it be an equity firm? Will it be a supplier? Will it be a customer? Will it be a friend? Will it be a new entrepreneur? Will it be a business tycoon?
Developing a profile of who will likely buy your business is just as important as building a profile of who your customers, employees, suppliers, lenders, and investors will be. It will help you to recognize the person who will buy your business when that time comes.
Being a Leader is Not Easy
This work may seem daunting, but I promise you it is far more difficult to proceed without a vision, stumbling around in the dark trying to figure this stuff out. Far more difficult and far more expensive because of all the unnecessary mistakes you will make.
You cannot predict the future so as you start building your business you will get additional information that will make your vision more precise and the image will become clearer. Despite not having all the required information you still must develop a vision in as much detail as possible. Let your mind free to create and to dream of what could be. Write everything down and then formulate a vision.
Business Plan Plus Action Equals Success
A strategic business plan is an essential tool on the entrepreneurial journey and the establishment of a solid foundation for your great business. Fortunately, you don’t need to create a masterful genius-level plan. A plan is nothing without people in place who take consistent daily action.
“An average person who develops the habit of setting clear priorities and getting important tasks completed quickly will run circles around a genius who talks a lot and makes wonderful plans but gets very little done.” – Brian Tracy
A common challenge that many self-employed people with service-based businesses face is called “Analysis Paralysis.” Which basically means that they plan constantly but don’t act.
“No plan survives contact with the enemy”. – Helmuth von Moltke
This military expression really captures the reality of what all business plans encounter. You are going to have problems, unexpected reactions from competitors, and unforeseen challenges. Just start and expect that things are going to start changing and you won’t be completely taken by surprise when they happen. Adjust your plan as you get additional information and keep acting.
A Leader Establishes Business Standards
Beyond planning WHY, WHAT, WHO, HOW, and WHEN your business will do what it will do, the leader is responsible for other things within the business, like establishing and upholding standards.
When you think about it the standards that we set for ourselves are the main determining factor in what happens to us over the course of our lives. If we have standards we will likely have higher expectations for ourselves and others, we will likely have more positive influences in our lives, and we will likely achieve greater things.
Low standards are synonymous with low expectations and poor results.
In business, you will find the higher the standards you have for your business, for your customers, for your employees, for your suppliers, for your lenders, and for your investors, the greater the results your business will produce.
If you have low standards you will attract the wrong kinds of customers, employees, suppliers, lenders, and investors and this will result in your business producing low or poor results.
I hope that you see that it is you alone that must build the foundation for your great business. That you as the leader are the one that creates the vision, develops the plans, creates the systems, and shows everyone how to do whatever your business does in a predictable way.
Remember that no one will care about your business as much as you do. Resist the urge to abdicate the responsibility of being the leader in your great business to someone else. Instead, take on the challenge of being a great leader and establish a solid foundation for your great business.
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