They must understand their duties and responsibilities for the business to be effective. There is a school of thought that believes the business should run the directors and not the other way round.
An effective business requires people working in the business not just on it.
The majority of small businesses do not work - plain and simple. Over eighty percent of small businesses fail within the first three years.
Most small businesses are run by owner-managers who bear all the hallmarks of victims. They will complain about overheads, staff, etc. and their businesses will never achieve their potential because they are always working in the business and not on it.
The key to avoiding this state of affairs is the recognition that a business needs to be run and managed ?things need to be planned and designed, they just don't happen.
It is essential for people to spend more time working on the business and not in the business. This is the magic formula for enabling you to run the business and not have the business run you.
So the question then begs should one be a director or manager?
Many small business directors are given the title as a matter of course or because they happen to be sitting in the room at the time the company is formed.
How many directors or board directors actually know the difference between managing and directing?
The typical response is complaints about the board and the responsibilities for the business, share options and so forth. It is almost as though many people put into these roles were meant to know the job by instinct once given the role.
The bottom line is that there is no manual and many people make it up as they go along.
To define further, managers look after day to day affairs and are glorified supervisors.
Directors, on the other hand, are responsible for all aspects of the business and its future direction.
The role of the board is fundamental to the growth of the business.
In recent years, the board's duties have been clarified, with the four main areas of the board being:
Strategic thought
Formulation of policy
Managing the managers
Accountability
There are some dilemmas arise from the four roles, however.
The skills to move the business forward while keeping it under control must be demonstrated.
The board must be alert to the short term pressures while being kept informed of the broader trends and competition externally.
The board must retain an objective point of view and stand back from day to day running whilst maintaining a sufficient knowledge of what is going on.
Commercial needs of the business need to be balanced with the need to act responsibly to towards employees, its business partners and general society.
Without clarity of leadership, focus, vision and mission the business will suffer greatly.
One of the great challenges for the growing business is to appoint and run an effective board that leads the business ? working on and not in, the business.
When I first started my business, I went to the bank for a business loan. Simple enough, right? I had my business plan in order, an itemized list of everything that I would need to successfully run my business, and all the necessary documents. To put it plainly, I was turned down. Why? Not because I did not have the credit to back it up, or did not have a good business plan. The reason the bank man gave me was "because I did not understand that over 90% of businesses fail within the first year, and that I was not prepared in case mine did."
While I understand he was attempting to look out for my best interest, I felt cheated. He was not even going to give me the opportunity to fail. On some level, everyone that goes into business for themselves understand that chances are, the business will not make it past it's first year, and I was no different. The only thing was I had faith in myself that I would not give up trying. The loan processor took that as I would spend my life savings before giving up, and he did not want to see me financially ruin myself.
So what did I do? I set out on the adventure on my own, only using the limited resources and financial backing that I had. I bought second hand office supplies and furniture. I bought the small cheap laptop instead of the multi-thousand dollar computer specifically designed for what I would be doing. Without the proper money for advertising, I had to get creative. My advertising methods was unconventional, but they worked. I found that I did not need large amounts of money in order to get my business to the world.
So would I have been so successful had the loan processor gave me the business loan I asked for? I am not sure, because after all, I made it without the money, what would have happened if I would have had the proper money for advertising? Whatever the case may have been, I am glad he did not, because I am not better able to understand the limited resources that many small businesses face.
So how can you run your business on limited resources? Here are a few things that I learned along the way.
1) New vs. Used- When starting your business, you do not need everything to be "new." Second hand items cost substantially less then new items, and work just as well. Plus, if you think about it, customers will be more comfortable around your office if it feels "broke-in", rather then new and sterile. It gives them the feeling that you have been in business awhile.
2) Creative Advertising- You do not need the hundreds of dollars that it takes to place ads in papers or put commercials on TV. It costs very little to design and print you own flyers and put them in places where your potential clients would gather. Turn your vehicle into a moving billboard by investing in a vinyl signage for your doors or windows. The best thing? Face to Face meetings with your potential clients do not cost a penny, so look for every opportunity to talk with our potential clients.
3) Work At Home- Depending on your type of business, you may consider working at home rather then renting office space. This will save you a lot of money on rent and furnishing an office. Once your business becomes more successful, then you can always rent office space later.
Overall, be thankful for the struggles that you go through now, because in the future, they will have been well worth it. Plus, it will give you a better understanding when it comes to other small businesses.
Both Nazir Daud & Rebecca Clary are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Nazir Daud has sinced written about articles on various topics from Online Business, Management and Accounting Bookkeeping General Svc. Naz Daud is the founder of CityLocal. This Business Franchise Opportunity is for people who would like to work from home and be their own boss.