Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 46

The ten commandments of small business

The elders gathered at the base of Mount Sinai and were impressed by the two stone tablets, but one had a question. “Moses, these commandments are very good, but where is the instruction book for small business?”

I spent 15 years toiling in the dealing rooms of major financial institutions, then in 1994 started my own company working in the small business sector. In the subsequent 20 years, here is some of what I’ve learnt.

1. The buck stops here

The owner is responsible for everything that occurs in the business and with complete control comes complete responsibility.

2. Just fix it

When things go wrong, and they will, the first course of action must always be to solve the problem and ensure that the parties involved know what is happening and what is being done to address any grievances. When this has been achieved, it’s time to examine the causes. Rather than immediately apportioning blame, work to adapt systems to avoid the issue recurring.

3. It’s not a job

As a business owner, you are an investor expecting a reasonable return for the risks you have taken on. You manage the business and allocate your resources as productively and efficiently as possible but don’t think of it as a job. It’s an investment decision and you create jobs for your employees who you expect to do the daily work.

Being able to delegate is an essential skill for the small business owner otherwise you’ll be too busy to focus on your strategy.

4. Have a plan

When you establish a business your bankers, accountants and lawyers will all want to see and dissect your written business plan. Blue sky projections and ambitious cash flow assumptions won’t wash. Once the business is up and running the business plan needs to be maintained and reviewed. I do this six monthly and try to take into account as many ‘big picture’ issues as possible. Too often I’ve seen plans that haven’t been fully thought through and the consequences are never pleasant. Keep asking ‘what if?’ until the potential outcomes are understood.

5. Listen

Advice comes from many quarters and good advice can be lost in the noise of information and opinion that is thrown at you. There’s the advice that you pay for from professionals like accountants, lawyers, bankers, financial planners and so on that is necessary and often contains gems. But remember that the Titanic was designed by professionals. There’s the advice from people in the industry that have been there and done that and survived and that too can be valuable.

I also like to listen to the little voices, the suggestions you hear from staff, warnings you hear from customers and ideas you read or pick up in the media.

6. Let’s be friends

I’m talking about friends in business and contrary to what many think you do have friends in business. I had one business with a competitor up the road and I always wondered how well he was doing: he would pinch my staff, put on aggressive special offers and install expensive equipment. One day I saw him in the street and asked “how’s business?” and he told me. There were no real surprises but he recommended a new machine to me which I bought. He was far more cooperative than I expected.

Industry groups and networking programs can both be helpful but taking a leaf out of the books of the two major retail chains or the four major banks you can see that they are not trying to kill each other but rather coexist happily.

7. Be honest, especially with yourself

Honesty in business can be a rare commodity so when you see it, be grateful. I find that the more brutally honest I am the simpler my life becomes. If I am honest with myself it helps with my planning. If something isn’t working, the hardest thing can be to admit it and change things but to do otherwise won’t help at all.

I also believe in running a ‘favour bank’, that is, helping others in business or as an employer in the knowledge that when I need some help it will be forthcoming. The more I put into the favour bank the more I find people will trust me.

8. Avoid jealousy and greed

It is natural to want more and in business you don’t plan not to grow. Expanding your reach and increasing your profit is the name of the game but keep this in perspective. The retail giants are unlikely to feel threatened by your presence. Greed is not necessarily good. If your aim is to run a small business, then don’t become a smaller one by trying to become too big. I have found that having more than six people reporting directly to me just crowds out the day with endless interruptions. Decisions that can be made without your involvement should be.

9. Be adaptable

Business plans like the superannuation tax laws can be changed at any time. Events can necessitate a complete rethink of the most basic plans -  just ask Captain Chesley B. Sullenberger whose US Airways flight 1549 had a change of flight plan that turned a night landing in Seattle into a splashdown in the Hudson River.

10. Remember to rest

Small business takes 24/7 to a level not seen in corporate life. It really does, to an extent few in corporate life can appreciate. The difference is that not only is it your money and your business but usually it is your family and your house at stake. Now that you are self-employed you don’t have entitlements like annual leave, sick leave, leave loading etc. It is vital to remember that you are in business to improve your quality of life not to sacrifice it, so take those holidays and make time for your family.

Life as a small business owner can be highly rewarding, not only financially but because you are your own boss and hopefully your destiny is in your own hands. But the extent to which the All Ords has significantly outperformed the Small Ords in recent years shows smaller is not always better.

And since the camel traders, carpet sellers and falafel makers at Mount Sinai did not send Moses back up the mountain for the small business commandments, you’ll have to make do with mine.

 

Bruce Montague is Director of Exeyco Pty Ltd, and has managed small businesses for 20 years. Any religious references are for illustration only and not intended to offend.

 

3 Comments
Scott Barlow
January 28, 2014

"With complete control comes complete responsibility" - I would disagree.

On the face of it, the sentiment seems logical but the truth for most small business owners and managers/leaders is that they should actually seek to take less responsibility.

Most of us think of "responsibility" as our "ability to respond" in other words we think we demonstrate we're being responsible when we actively respond to whatever needs a response.

For example, I might think of myself as a responsible parent, but if I am in a public space and my daughter mucks up and ignores my pleas to settle/sit down I'm certain others around me might not see me as being responsible, because my child ignores me and continues to be disruptive. What would actually demonstrate that I am "responsible" is thus not my actions, but rather how effective I am at getting others (my child) to respond.

Being "responsible" in business should be less about how you respond and more about how you get the right response from others.

In other words, small business owners and managers/leaders should cultivate an environment where responsibility is shared as oposed to taken by them.

I believe the best business owners and the most effective leaders find people with whom they can share responsibilities. When you leave some (most?) of the responsibility to others, guess what? - they feel responsible and this is tremendously supportive for everyone in the team and contributes markedly to overall success.

When it comes to taking responsibility, less is truly more.

John Peters
January 24, 2014

Bruce,

Nice to see the old "futures man" in full flight. Regards

Mark Thomas
January 23, 2014

Good article Bruce and I thoroughly agree! I wouldn't limit the comments to small business though. The experience I'm gaining in my advisory business is this advice is equally applicable to large as well as small business. Great advice!

 

Leave a Comment:

banner

Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Latest Updates

Retirement

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

Shares

On the virtue of owning wonderful businesses like CBA

The US market has pummelled Australia's over the past 16 years and for good reason: it has some incredible businesses. Australia does too, but if you want to enjoy US-type returns, you need to know where to look.

Investment strategies

Why bank hybrids are being priced at a premium

As long as the banks have no desire to pay up for term deposit funding - which looks likely for a while yet - investors will continue to pay a premium for the higher yielding, but riskier hybrid instrument.

Investment strategies

The Magnificent Seven's dominance poses ever-growing risks

The rise of the Magnificent Seven and their large weighting in US indices has led to debate about concentration risk in markets. Whatever your view, the crowding into these stocks poses several challenges for global investors.

Strategy

Wealth is more than a number

Money can bolster our joy in real ways. However, if we relentlessly chase wealth at the expense of other facets of well-being, history and science both teach us that it will lead to a hollowing out of life.

The copper bull market may have years to run

The copper market is barrelling towards a significant deficit and price surge over the next few decades that investors should not discount when looking at the potential for artificial intelligence and renewable energy.

Property

Global REITs are on sale

Global REITs have been out of favour for some time. While office remains a concern, the rest of the sector is in good shape and offers compelling value, with many REITs trading below underlying asset replacement costs.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.