My Findings
In order to know what it is that makes a Small Business successful several questions needed to be answered. Background research was critical in order to properly evaluate businesses in the community. Three weeks of research on business success, employee psychology, and leadership methods created a knowledge base on how Small Businesses can have success and set themselves up for future success.
What defines a small business?
In defining a small business one has to be flexible. The US Small Business Administration website has a Small Business size standards chart determining if a business qualifies as a small business. The standards were based on number of employees and total receipts and varied by business type, they were the standards for a business to qualify for small business federal programs. In Vermont most small businesses are well below those standards, most Vermont businesses have below the maximum number of employees and of those willing to list their receipts they were well behind the max standards.
How are businesses using technology to stay competitive?
In an increasingly technologically dependent society small businesses are at a disadvantage. Big companies are able to develop well designed and efficient web sites that make the customer feel like they barely have to lift a finger. It is not easy for a small business to compete with that, especially in a town like Rutland where we are big enough to have big companies all around, but small enough to have multiple small businesses competing with each other. In order to stay relevant businesses have to implement some technology into their business, but not so much that they lose their personal touch, that has to be their edge over big corporations. A website that is convenient for customers to use is crucial, but what is just as important is the use of technology for employees and owners. Accounting software and scheduling tools can help a business to be more efficient and save some money. There are programs that can handle almost all accounting work for under $200. There are also sites, like findaccountingsoftware.com that can find an accounting program that is tailor-made to any business and its needs. Things like company emails and mobile internet access at the business are all useful tools to keep employees happy and informed(SBA, 2014).
What are the characteristics and psychological states of employees within a good Small Business?
Employee psychology is an aspect of a business that is often overlooked. A large number of small businesses do not have HR departments or resources that give employees help on a psychological level which is why it is so important to keep employees happy and productive through leadership and planning. Management should try to keep employees in a setting where they are engaged and solving problems on their own. Stay away from giving them mundane tasks and acting like those tasks are important because employees will lose productivity and interest. Several theories have been found to really increase employee psychology. The Equity Theory which is ensuring that all employees feel that they are being rewarded equally and being treated equally. By treating employees equally no matter what position they have or the work that they do can lead to a higher level of respect between all employees and an feeling of obligation to do more in underachieving employees because they will want to feel like they have earned the equality. Valence-Instrumentality-Expectancy-Theory is a theory that states employees that are shown what it takes to achieve promotions, raises and bonuses are more likely to work towards those goals opposed to employees who are just working hard in hopes of getting those benefits. When shown a goal rather than blindly chasing one employees will work harder and be less likely to give up on a project and more likely to see it through in the most productive way possible. The Pygmalion Effect is that owners who expect high performance from all employees are more likely to achieve high performance. This aspect can be tricky. Some owners have been known to take it too far and that can lead to employee resistance and a loss of respect. An owner has to find a way to show that high performance is the standard without coming across as overbearing. (Gauthier, 8/17/11)
Creating a positive workplace
A work environment is seen as a second home to many employees. So much of their time is spent there and the atmosphere that the workplace has can have a huge effect on their state of mind. It all starts with the management of the business, an owner or manager needs to create a positive workplace environment. Some ways to keep employees comfortable and happy in the workplace are, praising employees publicly when they have done well, raise their own expectations for their work, not to make them feel that they have not done enough, but to keep them interested in doing something new and not feeling bored, and promote an environment where employees are solving problems on their own. (Gauthier, 8/17/11) Fellow employees can also influence how one feels in the workplace. Having employees with negative attitudes can be toxic for a business, that is why there are several types of employees who, if a business can obtain, can make the workplace a much happier and productive place. Employees who love what they do are always great, but some things are just as important as having a passion for the work. Employees who want to share their knowledge with new employees can create a more knowledgeable and competent workforce because with an employee showing others what they know a flow of information can ensue and every employee has an understanding of that employees job. A knowledge seeker is as important as a knowledge giver, having an employee who wants to learn more means there is one less employee to worry about getting tired and fed up with their work. Someone who shows a real interest in their work and wants to become better at that work is great for a business. A multi-skilled employee can keep everyone in the workplace happy. Having someone who can do multiple jobs and can help anyone with anything takes a huge burden off a lot of employees backs. All businesses can use morale boosters, any person who can make other employees happy while staying productive is great. Lastly, an employee that might be most valuable is one that can challenge the leader. Having an employee like this may scare off some owners, but in the long run it pays off. Other employees feel much happier with an employee who will challenge leadership in a positive way. It makes them feel like there is a more even ground between management and workers and makes everyone happier. (Spaight, 2/5/13)
How should I gather information?
In order to gain more information on local businesses I had to consider what would be the most effective way to get out into the community and gather information. What I ended up deciding to do was creating a survey for both employees and owners to obtain two viewpoints on similar information. I went into town and personally gave the surveys to each business and it gave me much better results.
What makes a good leader for a small business?
All successful endeavors, especially businesses need a successful leader, but what is it that makes a good small business leader? Small business owners usually do not have to lead a whole lot of people so it is tricky finding what works well for them. One interesting thing I found about business leadership is that for small businesses owners who are more active in the trade part of their business are more effective. Business owners who spent at least 40% of their time in marketing and sales saw a growth of revenue 60% faster than those who did not (State of the Business Owner, 2014). A presentation, by Roselinde Torres, on business leadership that I watched taught me some very important lessons. A business owner has to anticipate change in themselves before the company. So they have to think not of what changes can be made to the company, but what changes can be made by themselves and their way of thinking. Owners who can develop relationships with people different from them are more likely to get more input and better ideas for their business. Owners who are willing to swallow their pride and abandon practices they have had success with in the past, but are no longer working are forward thinking and honest leaders who can adapt to change. Lastly, owners who realize that possibilities of tomorrow are unpredictable and develop their business around the possibility of a changing market will have the most success when changes occur. All of these findings are what I now look for in the leaders of the businesses I am studying.
Productivity
A good leader can also increase productivity in his or her own business. The main flaws that leaders have when it comes to making employees productive is being overbearing and not trusting employees enough. An owner should always have the final say in all projects, but they should not feel the need to go over and approve every single detail of all projects. Giving useful feedback and having time for employees to work on their own will make employees feel respected and trusted and it will put them in the best position to be productive and successful. (Green, 9/24/13)
Marketing
Marketing is one of the most crucial parts of a small business’ success. Many businesses do little or no marketing without realizing that they are missing out on a huge bump in revenue from a successful marketing plan. Some questions that I hope to answer with my surveys are how do businesses reach their market and how well do they know their market. All businesses should have a marketing budget and should ensure that their investment is giving them a return of equal or greater value. I am also going to look at what marketing plans have worked best for businesses in our community. (SBA, 10/15/14).
Funding
When starting a business all owners need funding. How to obtain that funding is difficult because many companies or people with money are reluctant to give out funds because businesses that fail have no way of giving a return on their investment, unlike a house where is a bank loans money and the owners cannot pay for the house they bank gets a house back. There are two major types of funding generally for business and those are equity based financing and and debt financing. Equity financing is gaining money from investors who will not make you repay them. However, when using equity financing you lose some of the control of your business because those investors usually gain a share of the business. For small businesses equity financing may be the easiest way to gain money because investors are much more interested and invested in the company. Debt capital is a way of getting money and maintaining control of your business at the same time. The catch is that investors do not have to care how the business does, what they care about is getting the money they invested back, generally with interest. (Caldbeck, 11/14/12) So each resource has its drawbacks and benefits.
A Meeting With a Successful Business Owner
In order to obtain a more in depth understanding of how a small business owner sees the current business landscape and the problems small businesses are facing, I went into downtown Rutland and met with a very successful business owner. Here is some of the great information that owner was able to give me.
Problems Facing Startups
Many startups struggle to find funding. That is because companies and banks are reluctant to give money to a business because of the high risk of losing money on that investment. Most all local banks are owned by even larger banks so there really is not a lot of local input and investment by these entities. Larger businesses are also not very supporting of smaller businesses, some companies have begun to target smaller businesses in a hope to tap into their market. Companies like Facebook and LinkedIn have advertised themselves as friendly to small businesses, but they actually have begun to be less and less convenient for smaller businesses. Facebook in particular has begun to charge owners to “promote posts” which means they are making it so posts and promotions businesses are putting out for their followers to see are only being seen by so many. I went and researched this after our meeting and found that owners across the country have been seeing a huge drop in views because they are unwilling to let a public site like Facebook charge them to share their information. LinkedIn is no where near as bad as Facebook, but it can be annoying and sometimes pointless, clogging emails.
Good Use of Technology
Becoming too reliant on technology can lose that personal feel many small businesses have, a personal feel is one of the few advantages over big companies small businesses can exploit. A Point of Sales System is a great piece of technology that all businesses should have. From my meeting I found that this owner was able to use to POS System to send out reminders to customers about birthdays, anniversaries, and other celebration and they told me that the system has really helped increase the electronic connection between the business and the customers without being an emailing nuisance to them. Other POS Systems I have found are able to run an online shop, do multi state taxes on orders, and can track sales of customers to find interests and popular products. Other ways to use technology that the owner talked about were, creating a good and easy to use website and having the means to make same day deliveries.
Suggestions for Startups
When starting a business an owner should have a very good understanding, or an expertise in their area of trade. An owner who is just interested in a business type but has spent no time in that business are much less likely to succeed. Once a business is running it must be able to provide exceptional customer service, employees need to have great people skills, the business has to stress a quality product, and the business has to be able to target customers that need that product. Owners must also be prepared to take a risk, there will come a point in time where every business is at a crossroads and trusting oneself and being willing to take a risk to take a business to the next level will help give a business great success. Lastly, a business has to develop a solid and well structured business plan.
In order to know what it is that makes a Small Business successful several questions needed to be answered. Background research was critical in order to properly evaluate businesses in the community. Three weeks of research on business success, employee psychology, and leadership methods created a knowledge base on how Small Businesses can have success and set themselves up for future success.
What defines a small business?
In defining a small business one has to be flexible. The US Small Business Administration website has a Small Business size standards chart determining if a business qualifies as a small business. The standards were based on number of employees and total receipts and varied by business type, they were the standards for a business to qualify for small business federal programs. In Vermont most small businesses are well below those standards, most Vermont businesses have below the maximum number of employees and of those willing to list their receipts they were well behind the max standards.
How are businesses using technology to stay competitive?
In an increasingly technologically dependent society small businesses are at a disadvantage. Big companies are able to develop well designed and efficient web sites that make the customer feel like they barely have to lift a finger. It is not easy for a small business to compete with that, especially in a town like Rutland where we are big enough to have big companies all around, but small enough to have multiple small businesses competing with each other. In order to stay relevant businesses have to implement some technology into their business, but not so much that they lose their personal touch, that has to be their edge over big corporations. A website that is convenient for customers to use is crucial, but what is just as important is the use of technology for employees and owners. Accounting software and scheduling tools can help a business to be more efficient and save some money. There are programs that can handle almost all accounting work for under $200. There are also sites, like findaccountingsoftware.com that can find an accounting program that is tailor-made to any business and its needs. Things like company emails and mobile internet access at the business are all useful tools to keep employees happy and informed(SBA, 2014).
What are the characteristics and psychological states of employees within a good Small Business?
Employee psychology is an aspect of a business that is often overlooked. A large number of small businesses do not have HR departments or resources that give employees help on a psychological level which is why it is so important to keep employees happy and productive through leadership and planning. Management should try to keep employees in a setting where they are engaged and solving problems on their own. Stay away from giving them mundane tasks and acting like those tasks are important because employees will lose productivity and interest. Several theories have been found to really increase employee psychology. The Equity Theory which is ensuring that all employees feel that they are being rewarded equally and being treated equally. By treating employees equally no matter what position they have or the work that they do can lead to a higher level of respect between all employees and an feeling of obligation to do more in underachieving employees because they will want to feel like they have earned the equality. Valence-Instrumentality-Expectancy-Theory is a theory that states employees that are shown what it takes to achieve promotions, raises and bonuses are more likely to work towards those goals opposed to employees who are just working hard in hopes of getting those benefits. When shown a goal rather than blindly chasing one employees will work harder and be less likely to give up on a project and more likely to see it through in the most productive way possible. The Pygmalion Effect is that owners who expect high performance from all employees are more likely to achieve high performance. This aspect can be tricky. Some owners have been known to take it too far and that can lead to employee resistance and a loss of respect. An owner has to find a way to show that high performance is the standard without coming across as overbearing. (Gauthier, 8/17/11)
Creating a positive workplace
A work environment is seen as a second home to many employees. So much of their time is spent there and the atmosphere that the workplace has can have a huge effect on their state of mind. It all starts with the management of the business, an owner or manager needs to create a positive workplace environment. Some ways to keep employees comfortable and happy in the workplace are, praising employees publicly when they have done well, raise their own expectations for their work, not to make them feel that they have not done enough, but to keep them interested in doing something new and not feeling bored, and promote an environment where employees are solving problems on their own. (Gauthier, 8/17/11) Fellow employees can also influence how one feels in the workplace. Having employees with negative attitudes can be toxic for a business, that is why there are several types of employees who, if a business can obtain, can make the workplace a much happier and productive place. Employees who love what they do are always great, but some things are just as important as having a passion for the work. Employees who want to share their knowledge with new employees can create a more knowledgeable and competent workforce because with an employee showing others what they know a flow of information can ensue and every employee has an understanding of that employees job. A knowledge seeker is as important as a knowledge giver, having an employee who wants to learn more means there is one less employee to worry about getting tired and fed up with their work. Someone who shows a real interest in their work and wants to become better at that work is great for a business. A multi-skilled employee can keep everyone in the workplace happy. Having someone who can do multiple jobs and can help anyone with anything takes a huge burden off a lot of employees backs. All businesses can use morale boosters, any person who can make other employees happy while staying productive is great. Lastly, an employee that might be most valuable is one that can challenge the leader. Having an employee like this may scare off some owners, but in the long run it pays off. Other employees feel much happier with an employee who will challenge leadership in a positive way. It makes them feel like there is a more even ground between management and workers and makes everyone happier. (Spaight, 2/5/13)
How should I gather information?
In order to gain more information on local businesses I had to consider what would be the most effective way to get out into the community and gather information. What I ended up deciding to do was creating a survey for both employees and owners to obtain two viewpoints on similar information. I went into town and personally gave the surveys to each business and it gave me much better results.
What makes a good leader for a small business?
All successful endeavors, especially businesses need a successful leader, but what is it that makes a good small business leader? Small business owners usually do not have to lead a whole lot of people so it is tricky finding what works well for them. One interesting thing I found about business leadership is that for small businesses owners who are more active in the trade part of their business are more effective. Business owners who spent at least 40% of their time in marketing and sales saw a growth of revenue 60% faster than those who did not (State of the Business Owner, 2014). A presentation, by Roselinde Torres, on business leadership that I watched taught me some very important lessons. A business owner has to anticipate change in themselves before the company. So they have to think not of what changes can be made to the company, but what changes can be made by themselves and their way of thinking. Owners who can develop relationships with people different from them are more likely to get more input and better ideas for their business. Owners who are willing to swallow their pride and abandon practices they have had success with in the past, but are no longer working are forward thinking and honest leaders who can adapt to change. Lastly, owners who realize that possibilities of tomorrow are unpredictable and develop their business around the possibility of a changing market will have the most success when changes occur. All of these findings are what I now look for in the leaders of the businesses I am studying.
Productivity
A good leader can also increase productivity in his or her own business. The main flaws that leaders have when it comes to making employees productive is being overbearing and not trusting employees enough. An owner should always have the final say in all projects, but they should not feel the need to go over and approve every single detail of all projects. Giving useful feedback and having time for employees to work on their own will make employees feel respected and trusted and it will put them in the best position to be productive and successful. (Green, 9/24/13)
Marketing
Marketing is one of the most crucial parts of a small business’ success. Many businesses do little or no marketing without realizing that they are missing out on a huge bump in revenue from a successful marketing plan. Some questions that I hope to answer with my surveys are how do businesses reach their market and how well do they know their market. All businesses should have a marketing budget and should ensure that their investment is giving them a return of equal or greater value. I am also going to look at what marketing plans have worked best for businesses in our community. (SBA, 10/15/14).
Funding
When starting a business all owners need funding. How to obtain that funding is difficult because many companies or people with money are reluctant to give out funds because businesses that fail have no way of giving a return on their investment, unlike a house where is a bank loans money and the owners cannot pay for the house they bank gets a house back. There are two major types of funding generally for business and those are equity based financing and and debt financing. Equity financing is gaining money from investors who will not make you repay them. However, when using equity financing you lose some of the control of your business because those investors usually gain a share of the business. For small businesses equity financing may be the easiest way to gain money because investors are much more interested and invested in the company. Debt capital is a way of getting money and maintaining control of your business at the same time. The catch is that investors do not have to care how the business does, what they care about is getting the money they invested back, generally with interest. (Caldbeck, 11/14/12) So each resource has its drawbacks and benefits.
A Meeting With a Successful Business Owner
In order to obtain a more in depth understanding of how a small business owner sees the current business landscape and the problems small businesses are facing, I went into downtown Rutland and met with a very successful business owner. Here is some of the great information that owner was able to give me.
Problems Facing Startups
Many startups struggle to find funding. That is because companies and banks are reluctant to give money to a business because of the high risk of losing money on that investment. Most all local banks are owned by even larger banks so there really is not a lot of local input and investment by these entities. Larger businesses are also not very supporting of smaller businesses, some companies have begun to target smaller businesses in a hope to tap into their market. Companies like Facebook and LinkedIn have advertised themselves as friendly to small businesses, but they actually have begun to be less and less convenient for smaller businesses. Facebook in particular has begun to charge owners to “promote posts” which means they are making it so posts and promotions businesses are putting out for their followers to see are only being seen by so many. I went and researched this after our meeting and found that owners across the country have been seeing a huge drop in views because they are unwilling to let a public site like Facebook charge them to share their information. LinkedIn is no where near as bad as Facebook, but it can be annoying and sometimes pointless, clogging emails.
Good Use of Technology
Becoming too reliant on technology can lose that personal feel many small businesses have, a personal feel is one of the few advantages over big companies small businesses can exploit. A Point of Sales System is a great piece of technology that all businesses should have. From my meeting I found that this owner was able to use to POS System to send out reminders to customers about birthdays, anniversaries, and other celebration and they told me that the system has really helped increase the electronic connection between the business and the customers without being an emailing nuisance to them. Other POS Systems I have found are able to run an online shop, do multi state taxes on orders, and can track sales of customers to find interests and popular products. Other ways to use technology that the owner talked about were, creating a good and easy to use website and having the means to make same day deliveries.
Suggestions for Startups
When starting a business an owner should have a very good understanding, or an expertise in their area of trade. An owner who is just interested in a business type but has spent no time in that business are much less likely to succeed. Once a business is running it must be able to provide exceptional customer service, employees need to have great people skills, the business has to stress a quality product, and the business has to be able to target customers that need that product. Owners must also be prepared to take a risk, there will come a point in time where every business is at a crossroads and trusting oneself and being willing to take a risk to take a business to the next level will help give a business great success. Lastly, a business has to develop a solid and well structured business plan.