Small Business Is All About Relationships

It’s not just whom you know, but how well you know them

Reviewed by Chip Stapleton

With the world of business becoming increasingly more complex, small-business owners will find it extremely difficult to be an expert in all of the specialized disciplines their businesses need. In addition to the relentless requirement for small-business owners to generate and manage cash flow while bringing customers in the door, it is also critically important for them to cultivate business relationships with a reliable support team.

Key Takeaways

• Cultivating business relationships with outside providers of expertise is crucial to the success of a small business.
• Good employee and customer relationships are of primary importance.
• Necessary professionals to call on include bankers, accountants, lawyers, insurance representatives, marketers, specific skills trainers, and technology consultants.

Business Support Team Members

Depending on the nature of the business, its support group includes customers, employees, bankers, accountant/tax specialists, lawyers, insurance representatives, sales/marketing professionals, skills trainers, and technology consultants.

As it is unlikely that all this expertise will be available in-house, it is crucial for owners to develop and maintain close working relationships with many of these outside providers before any emergency need arises. Here’s a look at how cultivating relationships with each of these groups can favorably impact a small business.

Employees

A business owner’s relationship with the company’s employees is probably the most important one to cultivate. Good employees represent a major resource in a small business, so the time and effort an owner invests in nurturing those relationships have a huge return on investment (ROI). Employees who feel respected, listened to, and appreciated by management generally produce at higher levels.

In addition, employees represent the company to its customers. The business’s relationship with its customers largely depends on customers’ experience and interaction with the firm’s employees. Happy employees tend to want to satisfy the company’s customers, do a good job, and work hard to retain that job.

Happy employees can ensure the continuity of high-quality customer service and avoid the significant expense of employee turnover, retraining, and the inevitable rookie mistakes of new, inexperienced employees. Having trusted long-term employees can also free up the owner to handle offsite duties as needed.

Banker

A banking relationship is an obvious need—not only for routine business banking but also for growing capital, increasing inventory, buying a building, bridging a short-term gap between payables and receivables, or addressing the seasonality of the business’s cash flow.

Warning

Approximately 20% of new businesses fail within the first two years of opening, 45% during the first five years, and 65% during the first 10 years. Having strong relationships can help build longer success.

The banker to whom an owner goes for a loan should know the business owner, understand the history of the business, and have an understanding of the owner’s judgment and credibility regarding the reason for and ability to pay back the loan.

If the long-term relationship is there, or is at least in the process of being built, the loan request has a much better chance of getting approved. If the business has borrowed and repaid loans in the past, the established track record and relationship greatly enhance the prospects of being approved for credit in the future.

Accountant and Tax Specialist

A relationship with an accountant is equally important if the business owner is to be confident in the quality, clarity, timeliness, and understanding of the company’s finances and reporting obligations. A relationship with an accountant can also enhance the business’s credibility with a banker when seeking additional capital.

Many small businesses combine the accountant and tax-specialist functions in one outside entity for reasons of convenience, time-saving, and cost. This may be advantageous if the accountant has broad tax experience in the relevant industry and expertise in tax management for the specific business the accounting firm serves.

Legal Professional

Every business owner should have a relationship with a business lawyer, liability attorney, or legal firm. When an owner invests money and effort in building a business, it must be safeguarded from the loss that can arise from a lawsuit. While it is important to work with an attorney whom you can trust, it is also critical to choose one with extensive experience in the area of law for which you require their services.

Insurance Representative

As part of its risk management, a business should have a relationship with and seek out the trusted advice of an insurance representative. This professional should help provide the optimal levels of coverage in the areas of needed protection, keeping in mind any budgetary constraints.

Marketing Professional

Depending on an owner’s sales and marketing expertise, a relationship with a marketing professional is highly advised. Most small businesses start with an entrepreneur who has a specific technical skill, trade certification, or loyal customers for good work done. When the owner wants to grow the business beyond the established customer base, they should have a well-defined marketing plan that addresses the following issues:

• Targeting the market
• Optimizing the media used in marketing efforts
• Creating a brand strategy
• Assessing the competition
• Getting the best value for any marketing money spent

Business Trainer

Business owners and their employees are often in need of training. In a small business, especially in a startup, the owner may not have had time to acquire the types of skills necessary for managing a growing business with more employees, constantly evolving digital tools and systems, enlarging inventory, acquiring additional vehicles or equipment, and managing more customers. A relationship with an independent business skills trainer can fill that need.

IT Specialist

A more recent arrival on the required relationship list is the enterprise systems or information technology (IT) specialist. Business owners should have someone who can come in to analyze the existing digital systems and suggest ways to effectively and efficiently manage costs and optimize processes.

That person (or organization) should suggest specific strategies to keep the business competitive in terms of administrative, project management, and operating costs while ensuring the scalability of the business model through process improvements, enhanced system capacity, flexibility, and information security best practices.

Why Are Good Relationships Important for Small Businesses?

Building strong relationships with all stakeholders is a key element of success for small businesses. This includes employees, suppliers, customers, and investors. Keeping employees happy with good working conditions and pay should enhance productivity and loyalty. Positive relationships with suppliers could lead to better pricing while good customer relationships keep customers coming back, helping sales and profits. Keeping investors abreast of company dealings will encourage confidence.

How Can I Build Better Customer Relationships?

Building better customer relationships starts with listening to your customers, their wants, needs, complaints, and positive feedback. This allows you to adjust accordingly. Train and empower your employees, allowing them to interact with customers better. Present yourself as a company that focuses on clients from a humane aspect as opposed to being a faceless corporation, and lastly, use social media to engage with customers.

What Is a Good Business Relationship?

A good business relationship is one in which both parties benefit. There is honesty, openness, and trust throughout the entire relationship. It is also one that requires care, effort, and maintenance as good business relationships can last a long time.

The Bottom Line

The importance of connections between people in business can’t be overstated. While there may be many of these relationships, they aren’t necessarily time-consuming. They are, however, absolutely essential to long-term business success and worth their weight in gold when the business needs experts to help solve problems or take full advantage of a business window of opportunity.

Read the original article on Investopedia.