Accountability in Small Businesses
Becoming a small business owner is a straightforward endeavor. Taking a trip to the Secretary of State’s office, the state’s small business one-stop business portal, or utilizing an online service like LegalZoom, an individual can register a company within a day.
However, with that decision, the new business owner already must face small business accountability – either LLC or corporation status may protect them from business liabilities or debts but also makes them liable for taxes and reporting.
While a business owner can attain legal accountability by hiring an accountant and possibly a lawyer, the responsibility I want to talk about is the moral and ethical accountability of a business owner – no matter if as a solopreneur or as the nucleus of a future network of companies under one corporate brand.
From a structural perspective, accountability is critical to business growth – not particular to the speed of development but the structural integrity of a company as it relates to customers, business partners, vendors, and employees.
Make a Plan
The integrity of a professional service company, for example, is set by two main influences – the planning and the building aspects.
In construction terms, think of the architect versus the structure builder. In an owner-operated company – and about 73% of all U.S. small businesses count as such – the owner/operator sets its direction via the business plan, the business ethos – which most often reflects his principles – and the company’s budget.
The speed of success and growth depends on process management, quality control, and accountability in the execution of the projects.
Know your Strengths
The focus on the owner/operator in matters of accountability also means that the owner’s strengths and weaknesses are the strengths and weaknesses of the company. The advantage of a robust and unique skill set often drives the founding of the company in the first place – why else bother marketing a skill set to a group of potential customers?
As the company matures, a talent deficit in a specialized skill can be onboarded via employees or freelancers or outsourced to vendors. At that point, a business owner might feel tempted to hire white label services that perform work marketed by the business using their brand label.
While the business owner retains a fee for forwarding the work, they are still legally and ethically responsible for the job another company performed, at the disadvantage of not gaining any experience or expertise through project completion.
Risk and Reward
To retain accountability in a growing small business, the owner/operator of the company should focus on building expertise and seek growth of financial gains and rewards later.
However, that also means that the company owner needs enough starting capital not to risk sacrificing their principles because of a lack of cash flow or the mere prospect of a short-term gain opportunity.
An early mistake is that business owners become client-driven, not client-focused. Under the heightened pressure of client dependability, surrendering the company’s values and accountability can become a growing risk for the fledgling owner.
Know When to Hold ‘Em, Know When to Fold ‘Em
Sol Luckman said it takes money to make money, even when begging. That’s why many companies start as side hustles, then become the primary revenue source over time.
A new entrepreneur often can’t choose which project to take on and which to pass on. So in the early stages, before the business achieves profitability, every individual met by the owner/operator doubles as a possible client.
A business owner sooner or later learns the lesson of choosing the right project while letting another one go. As a rule of thumb, it helps to ponder if one would be willing to take on a project if it yielded half the earnings and took twice as long. Only then will talent and passion drive the project, not the need for an immediate financial reward.
The Color of Money
West Virginia SBDC coach Terry Cyfers told me in 2013, when I founded my brand and content consultancy, that an entrepreneur who doesn’t turn a profit is an amateur with a professional set of tools. So, he made me set and achieve profit targets, focusing on neither undercharging nor overseeing my clients.
Completing the Profit Mastery workshops under his guidance helped me understand ratios, read financial statements, and plan for future financial success.
I like to think my entrepreneurial skill set made my company profitable after three months. But primarily, I credit the combination of 25 years of work experience and low overhead – I covered IT and marketing myself – for letting me keep the revenue of the first projects as profit and build my company’s liquidity.
As an entrepreneur, you put in three times the work to achieve profit: You have to win the project, execute the work, and invoice the result compared to an employee who only focuses on completing the job. On top of that careful balance you manage, you have to deal with the sinus-shaped curve of market demand and project availability. Your clients value if your pricing keeps steady – the worst you can do is raise prices when project offers are lean and give away your work when project offers are abundant.
As you grow to become a leader in your line of business, you sooner or later learn your actual value and bill accordingly.
Giving and Receiving Are Two Sides of One Coin
According to Yoda, “the greatest teacher, failure is.” While he isn’t wrong, there is a less costly and painful way to “learn the ropes:” First, find a mentor; ideally, a peer who is not afraid to share general wisdom gained along the way and helps you see your business from a bird-eye perspective, and challenges how you think.
Then, when you have acquired some experience, don’t bother sharing it with your network and professional audiences that benefit from a nudge in the right direction. While you are in the business for profit, it is not a zero-sum equation.
Everyone has a finite set of skills, and cooperating in a local market will improve the quality of services delivered and raise the reputation of your craft or line of business.
Take Time to Reflect
Looking back on a career of over three decades of serving clients in advertising, brand marketing, and content creation, I know that two factors fuel my passion for business – and money, surprisingly, is not one of them.
Although I believe that financial success is the direct result of projects well done, and financial independence is vital for entrepreneurial decision-making, the people I worked for and with and the curiosity I have for technology and ever-changing audiences keep my interest.
A problem solver at heart, I constantly reflect on my work, my process, my decisions, and the changes I want to make in the future.
So how do you keep yourself accountable?
About the Author
Jens-Kristian Kiel is the founder and CEO of Made in Germany, an award-winning American brand and content consultancy.
Their services remove obstacles, create audiences, build followership, increase the client’s revenue, and add to their bottom line. A German native and Mountaineer by marriage, he is a consummate professional with significant national and international experience in advertising and branding, marketing, and social media.
Kiel has presented his workshops on business skills and digital communication nationwide to the Veterans Health Administration and regional at the WV Chamber’s “ResourceU,” Toyota Motor Works, the Small Business Administration’s District Office, and several regional and state-wide conferences.
In 2016, Kiel received the SBA’s “West Virginia Small Business Champion of the Year Award.” As a Subject Matter Expert in Brand Marketing for the WVSBDC, he helps small businesses pivot under the CARES Act in their strategic response to the COVID-19 pandemic.
WV SBDC business coaches have professional certifications ranging from exporting, innovation, technology and economic development, to finance, management, marketing and entrepreneurship.
For information about starting a small business in WV and resources for entrepreneurs, visit wvsbdc.com.