7 Lessons for Starting or Scaling a Business

This article was originally featured in Inc.

One of the top reasons a business fails is undercapitalization, followed closely by poor cash management. It’s not just small businesses that fail; about 50 percent of the companies on the Fortune 500 in 2003 do not exist today. On the other hand, the American economy is powered by small business and research shows that more than 20 percent fail in the first year, and 30 percent in year three. That means that 80 percent and then 70 percent succeed!

I’d venture a guess that those who do succeed have given themselves enough runway, from a capital perspective, to make well-considered decisions, versus decisions made from a place of desperation. I suspect that the most successful businesses have also found their niche, built a strong and mighty team, identified and embraced their target market, and worked tirelessly to be successful.

We founded our boutique wealth management firm 15 years ago, just as the Great Recession was reverberating and when the economy was still in recovery mode. While we were experienced and had a good plan, we learned valuable lessons along the way that contributed to our success. Apart from being well-funded, there are seven lessons we learned that apply to just about any fledgling enterprise:

1. Be crystal clear on your mission

Mission defines what you will do, culture speaks to how you will do it. Having a mission statement is—or should be—more than a couple of lines of copy for your website. Your mission creates an ephemeral goal, one that you’re always iterating towards. A smartly crafted, company-specific mission statement can become what you point to when choosing a particular path. It is a guidepost illuminating the path for everyone in your company, not just your leadership team, and ensuring that the big picture is always in focus.

Equally important is the culture you create. Culture exists whether it’s a priority or not, so be intentional about it. Culture can drive success and profitability. Study companies that have great cultures and you’ll quickly recognize that culture is something established at the top. And if you don’t define your culture, or the norms and behaviors making up your business atmosphere, that culture will be defined for you.

2. Vet your business plan

Business plans are important but they can’t predict the future; they can only provide a road map. The internet is overflowing with sample business plans, so don’t reinvent the wheel. Instead, be thoughtful and focus your energy on testing the plan against the best thinking you can access. Your local community likely has resources—from start-up support organizations to entrepreneur clubs to small business incubators. Availing yourself of these resources will not only improve your business plan, it will give you an invaluable community of support.

3. Consider all the ways to be a business owner

Maybe you want to be a business owner, but you’re not cut out for entrepreneurship, or your start-up has failed. Have you considered buying someone else’s business that is further down the path to success, or investing in a franchise? These paths to business ownership require a capital outlay, but often have a lower risk profile.

4. Manage risk, but don’t be afraid to fail

I wouldn’t be true to my CFO title if I didn’t acknowledge the role that risk plays in business failure. At the same time, I wouldn’t be a true entrepreneur if I didn’t suggest that you should not be afraid of to fail. Entrepreneurs are, by nature, optimistic; it’s judicious to consider that you put risk ahead of reward until you have achieved a margin of success—in other words, safety—in your business.

5. Build goodwill as you build your business

You’ll make mistakes, it’s impossible not to. What matters is how you recover. Be as relentless as you are ambitious about learning from your experiences and growing in knowledge even as you grow your business. Just as you will make mistakes, so will those around you. Hold your people to high standards and hold them accountable, but leave space and give grace to failure when it’s done in the pursuit of success.

6. Be flexible about roles and responsibilities

Work tirelessly but try not to be dogmatic about who will do what. In the beginning, it will likely be all-hands-on-deck, but as you grow, you’ll refine roles and responsibilities based on strengths that emerge in each of your team members. I didn’t start out leading our company’s financial organization, however, I was willing to take it on alongside my investing responsibilities. In the last five years, my role has been cemented as CFO/CIO, an acknowledgement of the leadership I’ve provided in those two areas.

7. Know when it is time for professional management

This was probably the most difficult thing for my firm to learn. In the beginning we ran the business ourselves, and we found our stride and hit our goals quickly. As our staff grew and opened a second office, our need for a COO became more and more clear. At the same time, it was difficult for our management team to let go. Eventually, we realized that this was an investment in our future growth; since hiring our COO, we have never looked back.

The best is yet to come

As you experience business success, new challenges and opportunities will emerge. With 15 years’ experience working with entrepreneurs and business owners in my rear view mirror, I know that for entrepreneurs, the highs are exhilarating and the lows are desperately low. And there is much to think about, do, and decide as a creator. As you’re focused on the details of crafting and growing your dream, it’s paramount to ask yourself: so what? That’s where the idea of legacy comes in, and it’s never too early to consider what it will all mean.

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