This book presents some unique tools and techniques that each successful entrepreneur ought to follow and adopt in order to guarantee their business growth and success. It primarily focuses on the challenges and difficulties associated with starting, managing, and growing a small business. It takes you through this journey, by addressing many of the obstacles that face individuals who decide to venture out and become self-employed. The discussion is divided so that it matches four distinct phases each small business goes through. The first phase, which is referred to as "success by chaos" describes the first 12 months or so of being in business. The next phase, "management by chaos" discusses the business challenges of the next 2-5 years. Next a discussion of the second set of five years of being in business is presented. Finally, the books closes by presenting 21 different qualities each small business CEO must master to become a leader in his or her industry.

Portrait of a CEO

A guide to starting and growing a small businessBy Bassem R. Mahafza

AuthorHouse

Copyright © 2010 Bassem R. Mahafza
All right reserved.
ISBN: 978-1-4520-8459-6

Contents

Preface.............................................................................TP1ξTP1TC1[Chapter One Introduction]TC1 1Chapter Two Get to Know the Facts...................................................7A few small business facts..........................................................7Anatomy of an entrepreneur..........................................................9The triple threat entrepreneurial personalities.....................................13Chapter Three Get to Know Yourself..................................................19Understand your past................................................................19Know your motives...................................................................24Chapter Four Getting Started........................................................31Types of business owners............................................................33Define your vision and mission......................................................36Know your niche.....................................................................38Understand value creation...........................................................41Know your competition...............................................................43Embrace the Internet and utilize your digital resources.............................47Chapter Five Success by Chaos, Level-I Entrepreneurs................................51Hiring help.........................................................................57The worker bee personality – my experience at dB Research.....................59The manager personality – my experience at dB Research........................63Following my own advice.............................................................64Chapter Six Management by Chaos, Level-II Entrepreneurs.............................67Poor delegation practices...........................................................71Poor cash management................................................................74Poor business planning..............................................................76Poor communication..................................................................82Poor people practices...............................................................85Chapter Seven Becoming a CEO, Level-III Entrepreneurs...............................89The Common Sense Formula............................................................91Company goals.......................................................................93Company initiatives.................................................................97Company culture.....................................................................98Customer base.......................................................................103The "triple threat" concept revisited...............................................105Chapter Eight Leading by Example....................................................109Defining leadership.................................................................110Leading example.....................................................................110Chapter Nine Dos of a CEO...........................................................115Be in charge........................................................................115Remember, all eyes are on you.......................................................120Keep a positive attitude............................................................122Be specific.........................................................................125Be nice.............................................................................125Praise publicly and reprimand privately.............................................126Manage your meeting intelligently...................................................127Keep your email messages short......................................................128Support community outreach activities...............................................130Always have options and contingency plans...........................................131Be loyal to principles, not people..................................................132Know your core competencies.........................................................134Know your competition...............................................................135Innovate and continuously market....................................................137Chapter Ten Don'ts of a CEO.........................................................141Don't expect a pat on the back......................................................141Don't blame others for your failures................................................142Don't allow your emotions to govern your conduct....................................143Avoid procrastination and decision by committee.....................................145Don't become complacent.............................................................147Don't seek perfection...............................................................148Don't compromise your integrity, ever...............................................149Chapter Eleven Final Thoughts.......................................................151

Chapter One

Introduction

An idea, like a ghost, must be spoken to a little before it will explain itself. Charles Dickens

This book focuses primarily on the challenges and difficulties associated with starting, managing, and growing a small business. It presents the tools and techniques that each successful entrepreneur ought to follow and adopt in order to guarantee their business growth and success. I take you through this journey by addressing many of the obstacles that face those of us who decide to venture out and become self-employed. First, let me tell you a little about who I am.

I came to the United States in the early 1980s. I wish I could add some drama to this fact by telling you I was escaping persecution by an evil foreign government, or I was lost at sea for months and rescued just in the nick of time. I was neither escaping nor lost. I simply arrived at JFK Airport on a jumbo jet. I arrived equipped with a powerful desire to live the American dream to its fullest, and to do so, I had about $1400 in my pocket to support my dreams. Over the years, I have taken many steps toward realizing my dream in all facets of my life, personally and professionally. Today, everything in my life that is worth keeping, I worked very hard at earning. Never has anyone dropped something worthy in my lap that did not require hard work.

In 2002 I founded a small engineering business supporting the defense industry. Very quickly, I turned into the President and CEO of a small business with an emphasis on advancements in radar systems and associated technologies. I had a vision of building "The Best Radar House" in the nation. Today I believe, although we are not quite there yet, that we are on our way to becoming that best radar house. I was, and I continue to be, very determined that we will succeed in accomplishing my long-term vision. I am also convinced that unless we give it our best shot and work hard on accomplishing this vision, it will never become a reality. Miracles do not exist anymore, especially in business. Only hard work, dedication, integrity, and high standards of work ethics will get us there.

I am an engineer and a mathematician by education and training. I think like an engineer, behave like an engineer, and write like an engineer. I did not attend business school; I attended engineering school. I do not have an MBA in business management; I have a PhD in Electrical Engineering. Prior to 2002 I was a professor, a technical lead, and a chief scientist, not a CEO.

In the past, I have written numerous technical articles, reports, and countless numbers of technical briefings and presentations. I also wrote the following technical textbooks on radar systems analysis and design:

1. Introduction to Radar Analysis, CRC Press, 1998;

2. Radar Systems Analysis and Design Using MATLAB, Chapman & Hall / CRC, 2000;

3. MATLAB Simulations for Radar Systems Design, Chapman & Hall / CRC, 2003;

4. Radar Systems Analysis and Design Using MATLAB, 2nd Edition, Chapman & Hall / CRC, 2005; and

5. Radar Signal Analysis and Processing Using5. MATLAB, Chapman & Hall / CRC, 2008.

At this point, some of you may start wondering:

Why should I be the one to tell you how to start, mange, and grow a successful business?

Why should you even continue reading this book?

Well, here's why.

In this book, I share with you my experience in establishing and growing my company, deciBel Research (dB Research), from a 1-person company with revenue of zero dollars in 2002 to a 78-person company with revenue of $15 million at the end of 2009. I have the option of discussing how I spent endless hours working from my home and two years without drawing a paycheck. I have the option of telling you about the sacrifices my family and I endured to get to where we are today. Although these things are true, I do not plan on talking about them in this book. Instead, I present and discuss a step-by-step methodology for starting and growing a successful small business. My hope is that you will learn from my experiences and thus avoid some of the difficulties I encountered growing the business.

There are numerous books on the market that discuss starting, managing, and growing a small business. Some of the arguments and topics presented in this book may find their origins in business management textbooks and other publications. However, my approach is different for two reasons. First, my book is unique because I present it in the context of growing a successful small business in an extremely competitive defense industry. Second, I describe my own climb on the entrepreneurial ladder, not someone else's.

This climb has been facilitated by what I refer to as the "Common Sense Formula." In subsequent chapters, I discuss the journey that led me to fully define and develop this formula which has worked for me and continues to successfully support my company's growth. In many ways, I wish I had known this approach right off the bat when I started my business, but I did not. Over time, I have developed and refined this formula as I gained a better understanding of the daily challenges of growing my company.

Chapter Takeaway

• There are many challenges and difficulties associated with starting and growing a small business.

• This book addresses these obstacles in the context of my own experience of starting and growing a thriving business.

• My Common Sense Formula allowed me to grow my company, dB Research, from a 1-person company with revenue of zero dollars in 2002 to a 78-person company with revenue of $15 million at the end of 2009.

Chapter Two

Get to Know the Facts

Sometimes the first duty of intelligent men is the restatement of the obvious. George Orwell

In this chapter I discuss three topics. First, I present some data obtained from the Small Business Administration (SBA) website regarding the role of small business in job creation and the contribution of small business to the United States Gross Domestic Product (GDP). Next, I briefly talk about the anatomy of an entrepreneur. More specifically, I discuss common chacterstics and distinguishing factors shared by many entrepreneurs. Then, I present my concept of an entrepreneur as three distinct individuals in one. I call them "triple threat" personalities or individuals. They are those who can do the work, manage the work, and grow the work.

A few small business facts

According to the SBA, each year small businesses are responsible for creating the most new jobs within the United States. Over the past 20 years, small business has contributed more than 75 percent of all job growth in the United States, making small business a major component and a pillar of the economic growth in the United States as a whole. Furthermore, small business employs about half of the nation's private sector workforce and provides more than 50 percent of the nation's farming products. For example, in 2004, small businesses with less than 500 employees employed a little over 50 percent of the nation's private sector workforce and generated 50.7 percent of its non-farm, private gross domestic product.

Small businesses with an emphasis on technology advancements and closely related products are responsible for a significant portion of the nation's innovations and technological breakthroughs each year. Reports provided by the SBA show that high-tech small business is primarily located in urban areas. Fast growing technology startups tend to crop up around major universities with strong research and development programs or in geographical areas with government institutions such as military bases or NASA Centers.

According to the SBA, the number of Americans who are self-employed or own their own small business is huge and continues to grow. Due to the recession of 2008, these numbers have dropped slightly, and despite that, they remain very strong. Specifically, the average rate of self-employment was 10.4 million and 10.1 million in 2007 and 2008, respectively. Alternatively, the incorporated self-employment remained steady at 5.8 million, on average, over the 2007-2008 two-year period. Some SBA studies show that the entrepreneurial activity rate (the percent of American non-business-owning adults who start a business each month) increased slightly in 2008 over 2007. This is consistent with the hypothesis that competition dries out during tough economic times, thus allowing more room for new aggressive small businesses to thrive and flourish.

Anatomy of an entrepreneur Some men see things as they are and ask why. Others dream things that never were and ask why not. George Bernard Shaw

Surveys conducted by the SBA from 1995-2007, which are also supported by other independent studies, show that the average entrepreneur or business founder is primarily white, male, married, and has at least one child. Close to three quarters of all new business owners have worked for someone else or some other company for some time prior to venturing into starting their own small business.

Age is another major distinguishing characteristic of self-employment as well. Most self-employed Americans tend to be older; a little under 15 percent of the self-employed were less than 35 years old in both 2000 and 2007. The number of self-employed individuals between the ages of 55 and 64 increased from 16.4 percent in 2000 to 21.9 percent in 2007. To some analysts, this is a clear indicator that the "Baby Boom" generation has sought entrepreneurship later in life.

In contrast with these facts, fewer veterans and nonwhites are self-employed, although the percentage of these categories has been on the rise in recent years. This is due, in part, to the federally sponsored programs that encourage minorities to seek self-employment.

Another trend of small business owners and entrepreneurs pertains to college education. Data collected by the SBA shows that individuals with a college or advanced technical degree are more likely to start a new business. Since the year 2000, the share of more educated self-employed individuals has increased from 32.7 percent to 36.6 percent in 2007. Entrepreneurs with a high school diploma or less accounted for 36.4 percent of the total in 2007, as compared to 39.7 percent in 2000.

Some studies indicate that the most significant source of funding for business startups comes from personal savings. More than 70 percent of new business founders use their personal savings as the primary source of funding over any other source available to them. A little over 50 percent of the remaining 30 percent borrow money from friends or family members. Less than 12 percent of new business owners depend on venture capital and private investments as a source for initial startup costs.

It is true that surveys, data collection, and studies, if conducted in a scientific manner, can provide an invaluable source of statistical information to policy makers and other academic and industry scholars. As a small business owner myself, it is my opinion that most surveys and studies fail to capture the corresponding emotional state and anxiety level of an entrepreneur associated with starting a new business.

It is also my contention that regardless of age, education, ethnic background, veteran status, or race, all entrepreneurs share a common characteristic; that is,

An unbeatable belief in themselves coupled with a strong desire to succeed in what they do.

Each year small businesses start in the U.S. at a staggering rate. The data provided by the SBA shows that over one million Americans establish a small business of some kind each year. Despite that, the contribution of small business to the nation's non-farm and private GDP over the past twenty years has been almost constant. Perhaps one explanation for this almost constant contribution level to the overall GDP is that small businesses are also failing at a high rate each year.

There are three distinct buckets in which I categorize small business failures. Category-1 includes the 40 percent or more of startups that statistics show fail within the first year of being in business. Category-2 includes small businesses that fail and close up shop within the first five years of being in business; 80 percent of those who make it through the first year fail within five years. Category-3 comprises businesses that are lucky enough to survive the first five years. Businesses in this third category face daunting odds within the following five years, and 80 percent of them fail within this period.

With such dismal odds stacked against startup small business, one cannot help but wonder:

Why do over one million Americans decide to start a new small business each year?

What motivates so many people with diverse backgrounds in education, training, and professional experience to start their own business, only to fail within one to five years?

Why do it, when most of these individuals are likely very good at what they do and most likely already have well-paying jobs?

What makes entrepreneurs different from everyone else; do they know things the rest of the people do not know?

Many variations of answers to the above questions are debated at length by most entrepreneurs. Starting a business is like catching a fever; one thinks about it all the time. And while sorting through these answers, entrepreneurs enjoy many exciting and rewarding thoughts and moments in anticipation of starting their business.

I am sure that you have your own unique and distinct answers to these questions. Here are some of mine:

Entrepreneurs have a strong urge to become their own boss.

Entrepreneurs believe they can make more money working for themselves than what they could earn working for others.

Entrepreneurs crave the excitement generated from starting a new adventure.

Entrepreneurs seek the esteem and pride associated with owning a business.

Entrepreneurs enjoy the gratification and joy related to creating work opportunities for others.

Entrepreneurs treat their work as their hobby, and cutting the cord with those they work for would facilitate further happiness in their lives.

The triple threat entrepreneurial personalities

A leader knows what's best to do; A manager knows merely how best to do it. Ken Adelman

Many new business startup failures share common underlying shortcomings that contribute to their final demise. Such shortcomings are tightly coupled to the individuals or entrepreneurs who start up and manage those businesses. It is my view that there are distinct chacterstics associated with each type of entrepreneur that survives beyond one, five, or ten years in business. Each phase of business has its own unique challenges that demands different entrepreneurial skills. Those individuals who master these skills survive each phase and move on to the next.

I categorize entrepreneurs into three levels and further map these levels of entrepreneurship onto three distinct entrepreneurial personalities; I call them "triple threat" individuals. Triple threat individuals are those who can do the work, manage the work, and grow the work. Table 1 shows this mapping of the triple threat personalities to the three levels of entrepreneurs.

Level-I entrepreneurs are those who possess the "know how" and desire to start a new business. They are the worker bees. Unfortunately, due to the lack of a long-term vision and because of their limited managerial skills, they fail within the first year of being in business. You see, being good at what you do, perhaps even the best in your profession, does not automatically qualify you to successfully run and manage the business of your profession. Level-I entrepreneurs survive the challenges of the first year of business because the excitement and momentum they acquired prior to starting the business carry them through this period. However, excitement and momentum alone are not enough to sustain the business beyond the first year.

Level-II entrepreneurs have all the skills and characteristics of level-I individuals. But, they have the added knack of knowing how to run a successful business. Like the level-I entrepreneurs, they are great worker bees, but they are also good managers. They understand how and know what to do in order to successfully manage and run a company. They thrive on finding solutions to their day-to-day business challenges. They use creative problem solving techniques to overcome and work around their competition. They know how to promote and market their business's services or products. They love being their own boss, and they are typically tough critics of themselves. But, they lack the long-term vision for their business, and so, their business does not survive beyond the first five years.

(Continues...)

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