Few professional experiences can be quite as exciting, rewarding, or potentially overwhelming as starting a new business. As a new business owner, you’re going to need all the practical and impartial advice you can get. Regardless of your previous experience, nothing can prepare you for the giant leap you’re about to take.
The good news is that there are some good sources of advice out there, and the wisest words typically come from other CEOs. The bad news is that not everyone has a contact book full of company directors. So, I’ve canvassed CEOs of companies big and small to find out what they really wish someone had told them before they took on the role.
1. Conduct your due diligence on prospective clients
Due diligence means doing any research necessary to ensure that new clients and vendors are legitimate viable commercial entities and that they’re a good fit for your company.
Ensure the success of a potential business transaction by looking at the way the client’s business is built, what its accounts are like, and what the backgrounds of the directors are before you enter into a contract.
The CEO should use that information to determine whether the client presents a risk to the business or is one they could work with safely.
For example, particularly in the early days, relying heavily on one major customer can be disastrous for a new business if that customer has not been researched thoroughly.
I’ve seen many new businesses failing because the customer they rely on either goes out of business or does not pay invoices on time. The result is a potential cash flow disaster that can result in the insolvency of an otherwise perfectly viable business.
2. Keep a close eye on debt
A certain amount of debt is inevitable for most businesses, as many borrow money to finance the purchase of buildings, machinery, equipment, and stock. In fact, debt financing plays an important part in many growing businesses, allowing them to capitalize on new opportunities that come their way.
However, the level of debt in a business must be monitored carefully. Debt repayments can impact directly on the level of cash flow in a business, and without sufficient cash flow, the business will not be able to operate effectively.
While debt can provide the leverage you need to grow, I often see new businesses that are suffocated by it. Yes, you’ve got to grow, but it must be within the financial constraints of your business.
As a general rule, the higher the volatility in your business, the less debt you should have. If your industry is stable and you can forecast sales with a high degree of accuracy, then you can afford to borrow more.
3. Find mentors
You might assume a CEO who is at the top of their profession has very little to learn, but the truth is that CEOs need mentors too. A new CEO can accelerate their learning by engaging the services of more experienced leaders from outside the business. They say it’s lonely at the top, but finding an old hand who is willing to dedicate some of their time to help a novice CEO learn the ropes is invaluable.
New CEOs will routinely face decisions they have not had to make before, which is where the perspective and feedback of someone who has been there and done it can really help. Having the view of someone outside the business can also provide an alternative perspective on the challenges you face.
Meditation and mindfulness are growing in popularity among senior executives and CEOs. Why? Well, along with the obvious stress-relieving benefits, there also seems to be more to gain than just rest and relaxation. Many CEOs are taking up mindfulness training as a method of developing leadership skills to help them achieve their business goals.
There’s evidence to support this; research on mindfulness and meditation suggests it sharpens skills like attention, memory, resilience, and emotional intelligence. The stress of running a new business can be all-encompassing and affect every aspect of your life. Before you know it, every waking moment is spent thinking (or worrying) about your business.
I know a number of CEOs that swear by meditation as the best way to focus on the here and now. I’ve even had one business owner tell me that meditation was “the best way to improve everything.” That’s high praise indeed!
5. Don’t assume things will magically work out
As a CEO, it is your job to have hard conversations and make difficult decisions. You cannot sit back and hope everything will work out—it won’t. Your job is to define the reality and deal with it. You can’t paint a rosy picture of what is actually going on because ultimately, the buck stops with you. If you don’t step up and tackle problems head-on, no one else will.
Delegation and seeking expert advice has an essential part to play in empowering CEOs. We’ve seen hundreds of new business owners struggle with their accounts in the early days, not wanting to outsource them to a specialist because budgets are tight.
But are you really saving money when it takes you a couple of days every month to do something an extra could do in an hour? Yes, the buck stops with you, but knowing when to share responsibility and trusting others to complete important tasks makes things run much more smoothly.
6. Express yourself in ways that leverage your natural strengths
Communication is an undervalued discipline in modern corporate leadership, despite it being arguably the most important skill a CEO can have. There is no one-size-fits-all approach to communication to guarantee success. It’s certainly true that the best business leaders make it a priority to communicate effectively, but how they choose to do that in this hyper-connected era is really up to them.
Not everyone is born with the capability to be an excellent communicator, but that does not mean you will fail in your role as a CEO. Instead, you must learn to communicate in the way that suits you. That means playing to your strengths, recognizing the weaknesses you have, and using the team around you to compensate. Great communicators do not need to be great talkers.
For example, John Wooden, the outstanding UCLA coach, was very softly spoken,, humble, and preferred to communicate with his teams through teaching by example and precept.
Marissa Mayer, the Yahoo CEO who seemingly exudes confidence and extroversion, is a self-confessed introvert who has to force herself to stay in situations that make her feel socially awkward. However, that doesn’t affect her ability to communicate effectively.
7. Think three times before hiring
Just as a bad hiring decision can be a hugely expensive mistake, a talented new recruit can transform your business for the better, particularly in the early days.
With that said, is a 20-minute interview really enough to assess the impact an individual could have on your business? In my own business, I always make sure all candidates sit skills assessments and practical tasks to give me more insight into how they will really operate. I then consider the available options at least three times, taking into account all the information I have, before making a decision.
8. Tax planning is a must
It can be difficult for founding CEOs to separate business financial planning and personal tax planning, which is why working with someone completely independent can be hugely advantageous. Often, the most beneficial course for the business isn’t always in your personal best interests. Having someone to help you get the right split between salary, dividends, bonuses, and pension contributions is key.
When hiring a tax advisor, look for someone who is a specialist in more than one area—for example, tax planning and tax return preparation is always advisable. You should make sure they have specific experience working with businesses of your size and in your sector.
9. Talk to customers as much as possible
A CEO might assume his job is to communicate with the company’s shareholders more than its customers, but research has shown that customers trust businesses more if the CEO tweets.
It’s a fact of life that we all trust people more than faceless entities, at least until we get to know them. The same can be said for the relationship between the head of a business and its customers. The idiosyncrasies, language, sense of humor, and tone of a CEO all help to erode the boundaries that exist.
For younger CEOs that have grown up in the social media age, they’re already using social media their personal lives, so communicating with customers comes as second nature to them.
For other CEOs, work on it until it becomes part of the fabric of the job. A few of the CEOs I personally like to follow on Twitter include Eddy Cue, the man behind Apple Music, who is far more engaging and personal than his boss; the eccentric Richard Branson, who’s always up to something new and usually quite barmy, and Brian Chesky, the young CEO of Airbnb.
Shaping the future
No one is expecting a new business founder to have all the skills they need to run a business effectively right from the off. A lot of these lessons are learned the hard way.
As someone who regularly works with struggling businesses, I’ve seen businesses that are swamped by debt make a full recovery and go on to be hugely successful. Regardless of the sector, simply seeking advice when you need it and finding someone you can trust to fill the gaps in your knowledge is the best advice there is.