As they say, nobody is good at everything, but everybody’s good at something! Unfortunately, if you’re a business owner, some of those things you are not good at can catch up with you.
That’s why it’s a good idea to take an inventory of your skills. What are you good at? What do you need to work on?
To help you on your skills development journey, here is my list of the top 9 business skills every leader needs.
1. Cash Flow Management
I’m starting with cash flow management because poor management is the most common reason businesses run into trouble.
You can be operating at a profit, but if you don’t have enough cash to pay your vendors and creditors, it can jeopardize your business.
Good cash flow management requires that you understand the cash and non-cash inflows and outflows of your business and that you link that knowledge with your short and long-term goals and obligations to make sure you’re not caught without enough to cover the bills.
How can you build your skills?
- First, get back to basics and learn about how cash and non-cash move through your business. Our guide, Financial Understanding for Small Business is a good place to start. Your goals should be to understand the difference between a cash flow statement and an income statement, and the difference between profitability and cash flow.
- Next, apply this knowledge to your business so you can understand where there is a mismatch between profitability and cash position. In particular, make sure you understand the following:
- Capital assets are a cash outflow when they are purchased (unless you’re financing the purchase), but on your income statement, the expense is amortized over multiple years.
- Inventory purchases are usually a cash outflow up front, but you can only recognize the revenue from a sale at the time the product is sold.
- That if you sell products to your customers on credit, it will show as revenue before you have received any cash. Conversely, if you purchase from your suppliers on credit, the expense will be recognized right away, but it won’t be a cash outflow until you make the payment.
- If you have debt, understand that your entire loan payment is a cash outflow, but only the interest portion is counted as an expense on your income statement.
- Learn how to prepare a cash flow projection for the next two years. Make your best guess at when cash will enter and leave your business. If your cash balance is poised to go below zero at any point, how will you handle the crunch?
- Understand the cash conversion cycle, which tells you how much time it takes you to convert inventory into sales, collect receivables, and settle your accounts payable. If your cycle is long, this can be a signal that you aren’t using your cash as effectively as possible.
2. Financial Management – Understanding Profitability and Margins
Financial management is an essential skill, but rather than thinking about it in terms of an onerous exercise with spreadsheets, think about it in terms of getting curious about your business and making sure that your efforts are moving you forward rather than digging yourself into a hole. Here are two key skills to master:
- Pricing and Margins: All business owners should have a good understanding of their margins (or how much money they make on every product or service they sell). It’s tempting to assume that if you sell a product for more than it cost you to produce, you’re making money, but that is often not the case! You need to account for packaging, labour, shipping, overhead and much, much more! Many entrepreneurs are surprised to learn their margins are not what they thought they were once they really dig in. This information can then be used to inform your pricing strategy.
- Breakeven Analysis: Another essential skill is learning to do a break-even analysis. This is where you analyze your fixed and variable costs to determine how much volume you need to sell to make a profit. Once you know how to do this, you can play around with your costs and volumes to see the potential impacts on your profits. For example, what happens if you lower your production costs by changing suppliers? What volume do you need to reach before you can move into a bigger location? Breakeven analysis can help you understand this and more.
I recently wrote about the importance of financial management, so if you need a reminder of why this is so important, check out that article.
3. The Art of Targeted Marketing
Do you feel like you’re doing a lot of marketing but not getting much back in the way of results? This is common. Sometimes new entrepreneurs move quickly between different marketing approaches, which has the effect of scattering your time and resources. This approach also doesn’t give enough time to see if what you’re doing is working (or as I like to say, “Is the juice worth the squeeze?”).
Focused marketing is about concentrating on your best potential customers and delivering a clear, consistent, and appealing message. WeBC’s workbook, Focused Marketing: Targeted Effort, Tangible Results will walk you through the process of identifying your market, creating your message, and choosing/implementing your marketing tools, but here are some tips to start building your skills now:
- Everyone is not your customer: All good marketing starts with segmenting your market to understand their demographics, geography, purchasing habits, interests, values, and other psychographics. Once you have your market segments, select one or two groups to focus your efforts on.
- Apply the four P’s of Marketing: Marketing is not just about advertising – There are other tools in your marketing toolbox (see my detailed article on this here). Apply the following tools with a laser focus on your target market and make better use of your time and money.
- Product: You are not your (only) customer. Make sure your products are customer-focused, not just things that you like.
- Price: Understand your customer’s willingness to pay, and create a data-informed strategy for how you change your prices to incentivise sales (markdowns, seasonal sales, bulk discounts, etc.)
- Place: Understand all the ways your product gets into your customer’s hands and what their purchasing journey looks like. Should you consider other sales channels?
- Promotion: Communicating with your customers is not just about advertising. Work on strategies that will help build strong, trusting relationships with your customers over the long term.
4. Delegation and Time Management
Sometimes I ask my clients this question: “If I could wave a magic wand and take away one of your problems, what would you ask for?”
Usually, people ask for more hours in the day! Thankfully, with improved delegation, this wish can often come true.
Many leaders are afraid to delegate work because they think they can do the task faster and better themselves and are afraid delegating will actually create more work for them. Sometimes this is true in the short term, but delegation is a skill that can be developed just like any other skill.
As you get better at delegating, your team will get better at doing the work, and you’ll have more time to work on your business rather than in your business.
- Practice patience: The first few times your employee does something for you, it might take them a long time, and you might not get the exact results you want. If you go into it knowing you need to be patient, you’ll be less likely to jump in to finish it yourself.
- Prepare for mistakes: Make sure your plan allows time for your employee to make mistakes—it’s a part of learning. For example, I recently taught my daughter how to crack an egg. Were there messes along the way? Absolutely! But after a few mistakes, she can now do it. I planned for the mess and let her go through the learning process.
- Plan for outcomes: Make sure your employee knows why they’re doing what they’re doing and what the final outcome should be—this will help them solve problems as they arise. Likewise, you should have a clear understanding of the outcome of the task to help keep quality in perspective—don’t let perfect be the enemy of good enough.
- Have the right team and delegate strategically: Of course, to do the above you need a strong team with the skills needed to do the work. Get to know your team’s strengths and weaknesses, and be sure to ask what they like to do or what skills they would like to improve. Then, delegate accordingly.
5. Cultivate an Entrepreneurial Mindset
There is no right or wrong way to be an entrepreneur, and I believe that anyone can bring their unique skills and talents to a business and have great success. However, there are some characteristics that we see more often in entrepreneurs than in the general population.
To cultivate an entrepreneurial mindset requires you to assess your personal characteristics to determine what your gaps are. Once you know what the gaps are, you can work on developing those skills. The Entrepreneurship Mindset Profile (EMP) provides a valuable framework to uncover your own strengths and opportunities for improvement. The EMP covers 14 characteristics, but here are three to consider as a start:
- Risk Acceptance: People with high-risk acceptance are generally more willing to take on risks if they think it will help them achieve their goals. If you’re an entrepreneur who doesn’t like taking risks, you can build this skill by shifting your mindset. Think about risk-taking as a non-negotiable part of being an entrepreneur, and brush up on the fundamentals of risk management so you can approach risk-taking in a measured way.
- Action Orientation: Many entrepreneurs have high action orientation, which means they take quick and decisive action to make things happen. Suppose you tend to be more sluggish in your decision-making, try to get to the root of why. Are you procrastinating? Are you worried you will fail? Do you need a lot of information before you make a decision? Once you know the root cause you can tackle the barrier in a targeted way.
- Self-Confidence: A person with high self-confidence is likely to feel that their existing skills and abilities are all they need to achieve their goals, and they take this confidence into their business dealings, which inspires others to trust them as well. If you need to bolster your confidence, find ways to connect with a supportive community in your industry, take extra training and skills development courses so you can be confident in your abilities, and also take the time to reflect on your past successes. Sometimes you just need to remind yourself of how awesome you are.
6. Strategic Planning and Growth Strategies
As an entrepreneur, you are building a business from the ground up, and building a business does not come with instructions. Thankfully, you can use the process of strategic planning to build a roadmap for where you want to go. There are three broad components of strategic planning to consider:
- Set your foundation: Setting the foundation means taking the time to lay out your vision, mission, and values for your business. These are the key pillars of your strategic plan, and they will help you focus your energy and make decisions about your business. Think of these as your guiding stars as you navigate growing your business.
- Set goals: Once you have your foundation in place, it’s time to turn your vision, mission, and values into action. Start at a high level—where do you want to be in the next five years? Be as specific as possible. Next, break that down into smaller goals. If you want to have sales of $1,000,000 in five years, how many sales do you need this year? What tactics will you use to meet that goal? See my recent article on growth strategies for ideas on how to grow your business.
- Implement, observe, and revise: This is the step many people forget or don’t make time for. Don’t make that mistake! Set up a plan at the beginning for how often you will check in on your progress toward your goals. It’s okay not to meet your goals, but make sure you use what you learned along the way to revise your goals. You should also plan to revisit your high-level strategy periodically. Do your vision, mission, and values still reflect the heart of your business? If not, it may be time to revisit them.
7. How to Sell
Some people are naturally good at sales. Other people? Not so much (myself included).
It can be hard to ask people to buy from you. You don’t want to be annoying, and what if they’re not interested? The truth is, all businesses are selling something, so if you want to succeed you will need to find a technique that fits your personal style. Here are some tips to help you build your skills.
- Be a problem solver: As an entrepreneur, you already know that your product or service must be something that solves a problem for your customers. If you look at your customers as people who will benefit from your solution rather than someone you have to sell to, the sales process will feel more natural and helpful. If they’re not in need of your solution, you can move on without feeling rejected. The problem-solving approach also helps you understand your customer’s true needs, which can help you tailor the solution or suggest something else.
- Build relationships and trust: Instead of looking at the sales process as a transaction, think of it in terms of building relationships. Maybe you won’t close the sale today, but if you can make your customer feel warm and welcomed, they’re likely to return. Good news—women are already great at building relationships and fostering trust with others.
- Challenge your assumptions about yourself: If you suffer from imposter syndrome or question your worth, this can impact your confidence when working with customers. If you feel this way, it may pay off to explore these feelings and work on developing tactics to overcome these feelings when needed.
8. Technical Skills
Many businesses, especially in the early days, are a one-woman show. You might be the cook, the server, the cleaner, and the dishwasher on any given day! And while it usually makes sense to outsource specialized activities to the people who are best at them, it’s also important for you, the entrepreneur, to have a basic handle on some key technical skills. Having basic technical skills will help you to 1) better identify when you need outside help, 2) scope projects and manage outside help more effectively, and 3) help you deal with emergencies as they arise. Here are a few of the essential technical skills to consider:
- Online marketing and social media: You should know the basics of the platforms you work on and be able to make attractive posts, look at your metrics, and engage with followers.
- Basic website maintenance/SEO: Depending on your business, it makes sense to have a basic understanding of your website and how to make small changes to it. This will allow you to edit a broken link or update a photo without going back to your developer. For bonus points, take a few SEO workshops to understand how to draw more visitors.
- Bookkeeping and reporting: Your accountant or bookkeeper is an essential part of your team, but you should be able to use your accounting software to pull basic reports and make entries on your own.
- Basic Analysis: Do you hate excel? If so, that probably just means you need more training! All entrepreneurs should have at least basic excel skills to allow them to prepare cash flow projections and budgets, and to analyze business data.
Communication is a soft skill, but it can have an outsized impact on your business if you’re not communicating effectively. Business communication is not just about what you say or write, but it’s also about how you say it, and, crucially, how you listen and react to others. By improving your communication skills, you can not only improve your relationships with your customers, but also with your employees.
- Remember body language: If you walk into a business and the salesperson is standing in a corner with their arms crossed and doesn’t make eye contact—that sends a message, doesn’t it? You might even leave the store right away. Or if your employee wants to talk and you don’t take your eyes off your phone, how does that make the employee feel? Take the time to learn more about non-verbal communication and pick one or two things to work on.
- Be professional: You might not care about typos and mistakes, but your clients and partners might! Always make an effort to catch typos and write in complete sentences. Learn how to proofread effectively, and always run your materials by a few people before sending them out into the world.
- Cut out the diminishing language: Assertiveness is an important skill for business owners. Sometimes it’s hard to be direct, but when you’re the boss, it’s part of your job! Take note of the language you are using. Do you use diminishing words and phrases like, “I just wanted to…”, or “It’s just an idea…”? Do you find it necessary to assure people that you won’t take too much of their time, saying things like, “can I have a quick minute of your time?”. Take note of your habits and start tackling one today. Removing “Just” from your vocabulary is a good start!