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How do you have the right leadership characteristic to lead a small business? You might think the most charismatic small business leaders will be the most successful. Don't believe it. We're sure you've also read somewhere that the best leaders use an iron fist to micro-manage their business. Don't trust that too. We bet you've also been taught the top leaders create the great ideas, and then unite people toward their vision. That's pure garbage. As a basis, all leaders must be able to work well in teams, and contribute through talent, knowledge and skills. Leaders must also organize people and resources to achieve desired results, and unite people toward a common vision. But what separates good leaders who have these qualities from great ones is the following.

Modesty and Determination

The best leaders -- as found by Good to Great author Jim Collins -- have this leadership characteristic: a compelling sense of modesty and fierce resolve to do whatever it takes to get results. They seem quiet and reserved from the outside, but to those who know them, they're intense workhorses who are obsessed about getting results.

Why an Ego Hurts the Company

When leaders have egos, their ambition is first and foremost for themselves -- not their company. They will create a weak management team to rid any potential challengers, and choose weak successors to highlight their abilities. Besides, what better way to stroke your ego when the place falls apart after you leave?

What Great Leaders Have

Yes, great leaders too have ambition, but they channel it to their company -- instead of themselves. When things are going well, these leaders attribute success to their team. They understand that outstanding companies must be well-collaborated. When things go bad, the leader takes responsibility and learns from what he or she could have done to make the situation better.

Results Drive Great Leaders

Great leaders will do whatever possible to make their company great. If that means firing their brothers because of performance issues, so be it. They set strict standards, and expect all to outperform their duties. They will set up their successors for more success, because the company is ultimately the most important.

Can This Leadership Be Learned?

This leadership can be learned if you have the will to shun your personal ego, and direct it toward building an enduring company. I believe the greatest legacy you can leave behind is building a company that will continue its greatness beyond your lifetime. Developing a great leadership characteristic is the goal of this guide. You've just learned the qualities great leaders have; the following links explain what great leaders do.
Posted on February 18

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This leadership quality is a hard one for most entrepreneurs. Entrepreneurs are known to be optimistic -- most of the time, too much. We don't get a sense of reality, because for most of us, we have too many dreams to be looking at what's in front of us. A lot of time, what's in front of us will determine a company's future. It's Okay to Say, "I Don't Know." Part of great leadership is humility. It's an understanding that you don't have all the answers. It's okay to say, "I don't know." If you have the right people on your bus, you will get an answer. More importantly, you won't mask the problem -- but bring it to the forefront to solve it most effectively. Get in the Habit of Asking Questions At a client company, we've helped them ask this question once a week to their employees: "How can we improve?" By asking questions early and often, they 're not hit with so many surprises (e.g. an employee quitting because of a bad manager). This keeps employee spirit up, and rids politics. Yes, Arguments are Good When you create a culture where employees can just air everything out, you get brutal and honest facts about your company. In meetings, create conflict. People will have differing opinions, so you'll need to create an environment where all opinions are appreciated. It's much better to have conflict now than to have a culture masked with harmony. When you get this, tensions among people build up until it's too late to mend it. A great leadership quality begins with the ability to confront facts and realities of the company before making any decisions.
Posted on February 18

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A prevailing myth for great leadership skill is that great leaders set a vision, and then recruit people to make their imaginations happen. This is utterly false. Before strategy, before vision, before ideas, great leaders first start out with finding the best people they can. Once they have those people, they then figure out where to take the company. Surround yourself with the best people you can find. You'll soon find out that your people decisions are more important than strategy, marketing, operations, you name it. If you're great at bringing onboard superstar players, your company will be the gem in your industry. We guarantee it. Why "Who" Before "What" As business guru Jim Collins points out, if you have the right people on the bus, they will stick with you regardless of what happens. They are there because of who else is on the bus. Yet, if people come onboard because of your vision, they will leave if the vision fails. Traits You Should Look For Don't look at their educational credentials, or their specific skills. These don't say much about the person's character. We would rather bring onboard a high-school-educated person from a disadvantaged background who is working three jobs to support his family, than an Ivy League student who's never worked a day in his life. To us, the first person has persisted through the hard knocks required to work in the real world. Something Funny Happens Among A+ Players When you bring superstars onboard, they usually bring on superstars also. Yet, when you bring on B players, they bring in C players, who then bring in D players -- and so on. Be Picky Your people decisions will be the most important undertaking for your small business. A vital leadership skill is to only hire the best. Where to Find More People You're not confined to help from your employees. If you're on a budget like most small business entrepreneurs, you can get help from consultants. You can subcontract qualified consultants to do the work for you when you need it, instead of hiring an ongoing and costly manager. Consultants come in various specialties -- including management, marketing, sales, finance, etc. You can also seek free help from current and retired executives and entrepreneurs through SCORE. There are local offices where they'll provide you with free and unlimited one-hour sessions. There's also a website where you can pose your questions, located at SCORE.org. Once you understand that surrounding yourself with the best people you can find, you've developed a vital and fundamental leadership skill to propel your company to success.
Posted on February 18

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If people aren't producing, the right leadership trait is to tell them quickly. The reason for this is two-fold: One, with non-producers on the team, it will affect the ability ones who are producing. This will hurt the company as a whole. Second, the non-producers will lose the time to find a company that suits them better. It's better to send people on their way quickly to help them find more suitable positions within another company. Your goal is not to be well-liked, but to get everyone to produce results. It may be hard for you because in small businesses, you'll have close relationships with your employees. Remember though, the livelihood of your small business depends largely on your people. By having someone who slacks off onboard, it'll affect the productivity of your other employees. It's a must to leave personal stuff at the door. Your main goal is to make your company better.
Posted on February 18

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What's the most important small business help I've received? Build a business that's greater than you, with a higher purpose beyond mere profits. We learned purpose from Jerry Porras and Jim Collins in their bestselling book, Built to Last. When your company is built on a solid purpose, you'll guide and inspire your company to do many great things. It's not an ideological finding by Porras and Collins. When you have purpose, you won't revolve your company around a product -- which like all products, will become obsolete. Instead, you reach for the shooting star -- and while you'll never get there, it will be your guide in all of your endeavors. This is the key to making your company last not only until you retire, but beyond your own life. It's a great legacy to leave behind. When Walt Disney built his company, he had one purpose in mind: to make the world happy. This became a never-ending quest for his company even after his passing. The construction of your company should constantly improve, as it will never be completed. Your purpose will help ensure you of this. The best small business help we've received is to emphasize purpose over profits. Without it, I don't think we'd all still be in business.
Posted on February 18

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Surround yourself with the right people. Not ideas, not systems, not anything else should come before finding the people who'll help you build your business. Many aspiring entrepreneurs starting out want to re-invent the wheel. It's better to get advice from those already with experience. It will accelerate your learning curve. Don't have the capital to hire competent managers or consultants? The Small Business Administration (SBA) can help with free advice from current and retired business executives through its SCORE.org program. Your local Chamber of Commerce, filled with plenty of small business owners and entrepreneurs, can also help you. Further, we've compiled bizoko.com to help you discover what we've learned in building a great business.
Posted on February 18

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An angel investor is one who invests her own money into a business -- usually at the startup stage. The common belief of angels is that they're all millionaires. It's not true. Most angels make $50 - 100,000 annually, so they're all around you. You don't have to confine yourself to the typical doctors, lawyers, accountants, and other businesspeople that normally stereotype the angel investment community. It's a good chance your Uncle Joe who lives in that nice home can also be your angel investor. Relatives, friends, acquaintances, and business associates are some of the most used angel investors. Why Go to an Angel Investor? If the bank can't provide you a large enough loan, or if venture capital is too large for your needs, angels make the perfect fit. Most are willing to invest up to $100,000. Also, venture capitalists are now reluctant to invest in startups after the dot-com bust. Angels are more willing. You can help win them over with a great business plan. A strong relationship with an angel wouldn't hurt also. What They Want Like venture capitalists, an angel investor wants a large return on their investment. If your company isn't the fast-growth type that can bring in top profits, you'll have a harder time dealing with angels. Don't let this stop you though. If you have good contacts with angels, or already have solid relationships with them (chances are, everybody does), most are willing to help you. They may not send stockpiles of cash, but they'll give you enough capital to jumpstart your company. Remember, like all investors, they want to know you're a good investment. Have a concise plan on hand that describes your company in one paragraph. Prepare for a detailed business plan that shows them you understand your industry. And get ready to answer a variety of questions. This could range from marketing plans to five-year personal goals. What about Control? It depends on the type of angel investor you have. Some are willing to give you total control. Still, others may want detailed financial statements weekly, and will want hands-on control at managing the company. Make sure you know and can accept their desires in exchange for capital. In most instances though, angels will provide you the control you need to run your business effectively. They will mentor you along the way to help your business succeed. A Graceful Exit As your company becomes established, your angel will want to cash out. Make sure you work out exit strategies with your angel before any surprises erupt. Understand how and when you two will end your relationship on good terms. For those that don't have enough startup cash, an angel investor is a great small business resource.
Posted on February 18

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Having a smart budgeting skill is a powerful tool. Budgeting's main purpose is to organize your finances around achieving an end goal, such as your 5-year plan. You wouldn't travel to Paris without knowing the resources to get there (e.g. equipment and transportation needed). Your 5-year plan shouldn't be any different. Developing a good budgeting skill will help you plan for the future activity, increase company profits and performance, make important financial decisions, defend against unforeseen problems, and most importantly, budget toward your goal. It gives you a clear standard to achieve. Most entrepreneurs just try to make next month's payroll. Smart entrepreneurs on the other hand think both short-term and long-term when budgeting. How to Budget Our most important budgeting tip starts with writing down your goal. Now staple this sheet to where you'll always see it. This keeps you focused on buying things that will only help you achieve this goal. Importantly, it rids you of buying unneeded items, and keeps your cash flow efficient. Once you have your goal handy, you'll have an easier time planning your short-term monthly finances, as well as your longer-term plans: quarter-to-quarter, and year-to-year. Set realistic goals for monthly, quarterly, and yearly timeframes. What do you expect to make? How will your profitability ratio improve? When will you know you've met the goals? Review your budgets regularly. This will help you change what's needed. Budgeting Gives You Goals Smart businesses use budgeting to set standards they want to achieve. They can then measure periodically their actual performance against predictions to see how they're doing. For example, let's say Marie's Home Furnishing sets goals to increase quarterly profits by 5% and yearly goals by 20%. When the quarter comes, Marie sees her company surpasses her quarterly goal by achieving a 7% increase. After a year though, she doesn't meet her expectations when her company only improves 15% in profits. The yearly setback lets Marie study how she could've improved her financials. Maybe she could've cut back on inventory, or increase employee productivity, or improve customer service. Developing a budgeting skill is a great tool to measure your performance. Sensitivity Analysis Another great tool of budgeting is that it lets you do a sensitivity analysis. It's a great way to plan for your business. When you have all of your variables down, you can adjust one variable to figure out how that affects the other variables. For example, if you reduce your operating expenses, you can see how it affects the amount of sales you'll need. Common variables in the sensitivity analysis include sales, cost of goods sold, operating expenses, interest rates, accounts receivables days, accounts payables days, inventory days, fixed asset purchases, and acquisitions. If done right, having a business budgeting skill is a great tool to monitor and improve your company's performance.
Posted on February 18

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In equity financing, you give up partial control of your company to business investors in exchange for their capital. As opposed to debt financing, where you're forced to repay the loan. Don't get too excited, yet. You can lose control of your company if your investors -- ranging from private angel investors to venture capital firms -- feel your company needs a change of direction. On the other hand, they'll leave total control to you if they think you're running an efficient business operation. What Business Investors Want Why did Silicon Valley's Sequoia Capital grant Google $12 million at its infancy? It saw great potential, wished for partial ownership in the company, and wanted to help control the company's direction. The decision was right when Google hit its IPO in 2004, turning the venture firm's eight-figure deal into a $200 million gain. Business investors, or equity partners, want great returns on their investments. For them, they love a great small business with enormous potential. To access this capital, your equity investors will want ownership in your company (e.g. shares if you're incorporated). They can also be involved in the management of your company, so be aware of this. No More Control? Remember, business partners want the best bang for their buck. They'll be on you to provide great results. If you don't have a clear sense of direction, your investors will assume control of your company. You'll lose the independence you may have wanted when you became an entrepreneur. The best defense mechanism from this is to use your available resources to the best of your abilities, before you seek outside equity financing. Your investors will more likely let you run the business, because you've already built some traction. Importance of Voting Control Another way to keep more control in your company is to understand voting control. Stocks in a company come in two different varieties: common (voting) and preferred (nonvoting). Equity investors can be more willing to accept preferred stock if you give them some incentives. For example, you can grant them the majority of the profits by disbursing dividends first to preferred stock owners. Giving Up Control: Can it Be Good? If you're a great business leader who's indispensable to the company, giving up equity control to business investors can be a good decision. It's better to own 10% of a $1 million company than 100% of a $100,000 company because the potential for greater success is so much higher. Sure, you'll be losing equity control, but because your investors feel you can't be replaced, they'll give you great management power in the company's direction. If you believe you can provide a great return on an outside investment, equity financing may be a great choice for you. Equity Investment Options There are two sources of investment: those who invest their own money into your business (angel investors) and those who use other people's money to invest in yours (venture capitalists). Learn more in-depth information through the following links. Angel Investors: They're all around you. Know what to do. Venture Capital: It's hard, but you'll learn the best way to get it.
Posted on February 18

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Along with self-financing, this can be another great source to free financing for small business. But be careful. If you're unsure you can pay back the money, it can destroy relationships. That's why it's vital that you first believe in the viability of your venture before you start seeking financial help. Otherwise, it can mean disaster. On the flip side, it's the second easiest form of financing. You've already built strong relations with them, adding to your credibility that you can pay back their loans. If they have the finances, they'll normally grant you a loan if they like your business acumen. You can expect the loans to be interest-free or at low interest rates. What to Do Pitch the person as you would any other lender. Be professional, and show financial statements and tax returns if needed. First, approach the person you'd feel comfortable in borrowing. Then present your business ideas. They will ask you a lot of questions. Don't be too secretive. It's their money at stake, so answer your questions fully. You'll need to present a formal business plan. We've said before, you wouldn't need this to build your company; but you'll need it in this case because you'll be using someone else's money. If They Say No Don't be too distraught if they decline your request. Use it as a feedback that there are some holes in your business plan. Ask them why they rejected your proposal. You'll get some great insights on improving your ideas for the future. And if they say yes? Put it into writing. It's important to write everything down about the loan agreement. Specify legal responsibilities for both parties. State when the loan should be paid back. You don't want to get into bitter fights with your loved ones. Communication is Key If your investors don't plan on being active in your company, keep them in constant contact with how the business is doing. It's a nice gesture to let them know how well their investment is going. Doing it once a month would send a good signal. Importantly, make sure you send them periodic payments to repay for their investment. If done correctly, friends and family is a great source to free financing for small business.
Posted on February 18

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